Attached files
file | filename |
---|---|
8-K - Prestige Consumer Healthcare Inc. | v192487_8k.htm |
EX-23.1 - Prestige Consumer Healthcare Inc. | v192487_ex23-1.htm |
EX-99.1 - Prestige Consumer Healthcare Inc. | v192487_ex99-1.htm |
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Prestige
Brands Holdings, Inc.
Audited
Financial Statements
March
31, 2010
Report
of Independent Registered Public Accounting
Firm, PricewaterhouseCoopers LLP
|
F-1
|
|
Consolidated
Statements of Operations for each of the three years in the period
ended March 31, 2010
|
F-2
|
|
Consolidated
Balance Sheets at March 31, 2010 and 2009
|
F-3
|
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Income for each
of the three years in the period ended March 31, 2010
|
F-4
|
|
Consolidated
Statements of Cash Flows for each of the three years in the period
ended March 31, 2010
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
|
Schedule
II—Valuation and Qualifying Accounts
|
F-42
|
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders
Prestige
Brands Holdings, Inc.
In our
opinion, the accompanying consolidated balance sheets and related consolidated
statements of operations, of stockholders equity and comprehensive income and of
cash flows present fairly, in all material respects, the financial position of
Prestige Brands Holdings, Inc. and its subsidiaries at March 31, 2010 and
2009, and the results of their operations and their cash flows for each of the
three years in the period ended March 31, 2010 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of March 31,
2010, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for these financial
statements, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Annual Report on Internal Control over
Financial Reporting appearing under Item 9A of the Company's 2010 Annual Report
on Form 10-K. Our responsibility is to express opinions on these
financial statements and on the Company's internal control over financial
reporting based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/
PricewaterhouseCoopers LLP
Salt Lake
City, Utah
June 11,
2010, except with respect to our opinion on the consolidated financial
statements insofar as it relates to the Condensed Consolidating Financial
Information (Note 20), as to which the date is August 2, 2010.
F-1
Prestige
Brands Holdings, Inc.
Consolidated
Statements of Operations
Year
Ended March 31,
|
||||||||||||
(In
thousands, except per share data)
|
2010
|
2009
|
2008
|
|||||||||
Revenues
|
||||||||||||
Net
sales
|
$
|
296,922
|
$
|
300,937
|
$
|
313,125
|
||||||
Other
revenues
|
5,101
|
2,210
|
1,982
|
|||||||||
Total
revenues
|
302,023
|
303,147
|
315,107
|
|||||||||
Cost
of Sales
|
||||||||||||
Cost
of sales (exclusive of depreciation shown below)
|
144,587
|
144,196
|
151,811
|
|||||||||
Gross
profit
|
157,436
|
158,951
|
163,296
|
|||||||||
Operating
Expenses
|
||||||||||||
Advertising
and promotion
|
31,236
|
37,777
|
34,243
|
|||||||||
General
and administrative
|
34,195
|
31,888
|
31,414
|
|||||||||
Depreciation
and amortization
|
10,552
|
9,423
|
9,219
|
|||||||||
Impairment
of goodwill and intangible assets
|
2,751
|
249,285
|
—
|
|||||||||
Total
operating expenses
|
78,734
|
328,373
|
74,876
|
|||||||||
Operating
income (loss)
|
78,702
|
(169,422)
|
88,420
|
|||||||||
Other
(income) expense
|
||||||||||||
Interest
income
|
(1)
|
(143)
|
(675)
|
|||||||||
Interest
expense
|
22,936
|
28,579
|
38,068
|
|||||||||
Loss
on extinguishment of debt
|
2,656
|
—
|
—
|
|||||||||
Miscellaneous
|
—
|
—
|
(187)
|
|||||||||
Total
other (income) expense
|
25,591
|
28,436
|
37,206
|
|||||||||
Income
(loss) from continuing operations before income taxes
|
53,111
|
(197,858)
|
51,214
|
|||||||||
Provision
(benefit) for income taxes
|
21,849
|
(9,905)
|
19,168
|
|||||||||
Income
(loss) from continuing operations
|
31,262
|
(187,953)
|
32,046
|
|||||||||
Discontinued
Operations
|
||||||||||||
Income
from discontinued operations, net of income tax
|
696
|
1,177
|
1,873
|
|||||||||
Gain
on sale of discontinued operations, net of income tax
|
157
|
—
|
—
|
|||||||||
Net
income (loss)
|
$
|
32,115
|
$
|
(186,776)
|
$
|
33,919
|
||||||
Basic
earnings (loss) per share
|
||||||||||||
Income
(loss) from continuing operations
|
$
|
0.63
|
$
|
(3.76)
|
$
|
0.64
|
||||||
Net
Income (Loss)
|
$
|
0.64
|
$
|
(3.74)
|
$
|
0.68
|
||||||
Diluted
earnings (loss) per share
|
||||||||||||
Income
(loss) from continuing operations
|
$
|
0.62
|
$
|
(3.76)
|
$
|
0.64
|
||||||
Net
Income (Loss)
|
$
|
0.64
|
$
|
(3.74)
|
$
|
0.68
|
||||||
Weighted
average shares outstanding:
|
||||||||||||
Basic
|
50,013
|
49,935
|
49,751
|
|||||||||
Diluted
|
50,085
|
49,935
|
50,039
|
See
accompanying notes.
F-2
Prestige
Brands Holdings, Inc.
Consolidated
Balance Sheets
(In
thousands)
|
March
31,
|
|||||||
|
2010
|
2009
|
||||||
Assets | ||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$
|
41,097
|
$
|
35,181
|
||||
Accounts
receivable
|
30,621
|
36,025
|
||||||
Inventories
|
29,162
|
25,939
|
||||||
Deferred
income tax assets
|
6,353
|
4,022
|
||||||
Prepaid
expenses and other current assets
|
4,917
|
1,358
|
||||||
Current
assets of discontinued operations
|
—
|
1,038
|
||||||
Total
current assets
|
112,150
|
103,563
|
||||||
Property
and equipment
|
1,396
|
1,367
|
||||||
Goodwill
|
111,489
|
114,240
|
||||||
Intangible
assets
|
559,229
|
569,137
|
||||||
Other
long-term assets
|
7,148
|
4,602
|
||||||
Long-term
assets of discontinued operations
|
—
|
8,472
|
||||||
Total
Assets
|
$
|
791,412
|
$
|
801,381
|
||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$
|
12,771
|
$
|
15,898
|
||||
Accrued
interest payable
|
1,561
|
5,371
|
||||||
Other
accrued liabilities
|
11,733
|
9,407
|
||||||
Current
portion of long-term debt
|
29,587
|
3,550
|
||||||
Total
current liabilities
|
55,652
|
34,226
|
||||||
Long-term
debt
|
||||||||
Principal
amount
|
298,500
|
374,787
|
||||||
Less
unamortized discount
|
(3,943
|
)
|
—
|
|||||
Long-term
debt, net of unamortized discount
|
294,557
|
374,787
|
||||||
Deferred
income tax liabilities
|
112,144
|
97,983
|
||||||
Total
Liabilities
|
462,353
|
506,996
|
||||||
Commitments
and Contingencies – Note 16
|
||||||||
Stockholders’
Equity
|
||||||||
Preferred
stock - $0.01 par value
|
||||||||
Authorized
– 5,000 shares
|
||||||||
Issued
and outstanding – None
|
||||||||
Common
stock - $0.01 par value
|
||||||||
Authorized
– 250,000 shares
|
||||||||
Issued
– 50,154 shares at March 31, 2010 and 50,060 at March 31,
2009
|
502
|
501
|
||||||
Additional
paid-in capital
|
384,027
|
382,803
|
||||||
Treasury
stock, at cost – 124 shares at March 31, 2010 and 2009,
respectively
|
(63)
|
(63)
|
||||||
Accumulated
other comprehensive income (loss)
|
—
|
(1,334)
|
||||||
Retained
earnings (accumulated deficit)
|
(55,407)
|
(87,522)
|
||||||
Total
Stockholders’ Equity
|
329,059
|
294,385
|
||||||
Total
Liabilities and Stockholders’ Equity
|
$
|
791,412
|
$
|
801,381
|
See
accompanying notes.
F-3
Prestige
Brands Holdings, Inc.
Consolidated
Statement of Changes in Stockholders’
Equity
and Comprehensive Income
Common
Stock
|
Additional
|
Accumulated
Other
|
|||||||||||||||||||||||||||
Par
|
Paid-in
|
Treasury
Stock
|
Comprehensive
|
Retained
|
|||||||||||||||||||||||||
Shares
|
Value
|
Capital
|
Shares
|
Amount
|
Income
|
Earnings
|
Totals
|
||||||||||||||||||||||
(In
thousands)
|
|||||||||||||||||||||||||||||
Balances
at March 31, 2007
|
50,060
|
$
|
501
|
$
|
379,225
|
55
|
$
|
(40
|
)
|
$
|
313
|
|
$ |
65,335
|
$
|
445,334
|
|||||||||||||
Stock-based
compensation
|
—
|
—
|
1,139
|
—
|
—
|
—
|
—
|
1,139
|
|||||||||||||||||||||
Purchase
of common stock for treasury
|
—
|
—
|
—
|
4
|
(7
|
)
|
—
|
—
|
(7
|
)
|
|||||||||||||||||||
Components
of comprehensive income
|
|||||||||||||||||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
33,919
|
33,919
|
|||||||||||||||||||||
Amortization
of interest rate caps reclassified into earnings, net of income tax
expense of $228
|
—
|
—
|
—
|
—
|
—
|
373
|
—
|
373
|
|||||||||||||||||||||
Unrealized
loss on interest rate caps, net of income tax benefit of
$458
|
—
|
—
|
—
|
—
|
—
|
(738
|
)
|
—
|
(738
|
)
|
|||||||||||||||||||
Unrealized
loss on interest rate swap, net of income tax benefit of
$580
|
—
|
—
|
—
|
—
|
—
|
(947
|
)
|
—
|
(947
|
)
|
|||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
32,607
|
|||||||||||||||||||||
Balances
at March 31, 2008
|
50,060
|
$
|
501
|
$
|
380,364
|
59
|
$
|
(47
|
)
|
$
|
(999
|
)
|
$
|
99,254
|
$
|
479,073
|
|||||||||||||
Stock-based
compensation
|
—
|
—
|
2,439
|
—
|
—
|
—
|
—
|
2,439
|
|||||||||||||||||||||
Purchase
of common stock for treasury
|
—
|
—
|
—
|
65
|
(16
|
)
|
—
|
—
|
(16
|
)
|
|||||||||||||||||||
Components
of comprehensive income
|
|||||||||||||||||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
(186,776
|
)
|
(186,776
|
)
|
|||||||||||||||||||
Amortization
of interest rate caps reclassified into earnings, net of income tax
expense of $32
|
—
|
—
|
—
|
—
|
—
|
53
|
—
|
53
|
|||||||||||||||||||||
Unrealized
loss on interest rate caps, net of income tax benefit of
$238
|
—
|
—
|
—
|
—
|
—
|
(388
|
)
|
—
|
(388
|
)
|
|||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(187,111
|
)
|
||||||||||||||||||||
Balances
at March 31, 2009
|
50,060
|
$
|
501
|
$
|
382,803
|
124
|
$
|
(63)
|
$
|
(1,334
|
)
|
$
|
(87,522
|
)
|
$
|
294,385
|
See
accompanying notes.
F-4
Prestige
Brands Holdings, Inc.
Consolidated
Statement of Changes in Stockholders’
Equity
and Comprehensive Income
Accumulated
|
||||||||||||||||||||||||||||||||
Common Stock
|
Additional
|
Other
|
||||||||||||||||||||||||||||||
Par
|
Paid-in
|
Treasury Stock
|
Comprehensive
|
Retained
|
||||||||||||||||||||||||||||
Shares
|
Value
|
Capital
|
Shares
|
Amount
|
Income
|
Earnings
|
Totals
|
|||||||||||||||||||||||||
Balances
at March 31, 2009
|
50,060
|
$
|
501
|
$
|
382,803
|
124
|
$
|
(63
|
)
|
$
|
(1,334
|
)
|
$
|
(87,522
|
)
|
$
|
294,385
|
|||||||||||||||
Stock-based
compensation
|
94
|
1
|
1,224
|
—
|
—
|
—
|
—
|
1,225
|
||||||||||||||||||||||||
Components
of comprehensive income
|
||||||||||||||||||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
—
|
—
|
32,115
|
32,115
|
||||||||||||||||||||||||
Amortization
of interest rate caps reclassified into earnings, net of income tax
expense of $818
|
—
|
—
|
—
|
—
|
—
|
1,334
|
—
|
1,334
|
||||||||||||||||||||||||
Total
comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
33,449
|
||||||||||||||||||||||||
Balances
at March 31, 2010
|
50,154
|
$
|
502
|
$
|
384,027
|
124
|
$
|
(63
|
)
|
$
|
—
|
$
|
(55,407)
|
$
|
329,059
|
See
accompanying notes.
F-5
Prestige
Brands Holdings, Inc.
Consolidated
Statements of Cash Flows
Year Ended March 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
(In
thousands)
|
||||||||||||
Operating
Activities
|
||||||||||||
Net
income (loss)
|
$
|
32,115
|
$
|
(186,776)
|
$
|
33,919
|
||||||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||||||
Depreciation
and amortization
|
11,450
|
11,219
|
11,014
|
|||||||||
Gain
on sale of discontinued operations
|
(253)
|
—
|
—
|
|||||||||
Deferred
income taxes
|
11,012
|
(19,955)
|
10,096
|
|||||||||
Amortization
of deferred financing costs
|
1,926
|
2,233
|
3,007
|
|||||||||
Impairment
of goodwill and intangible assets
|
2,751
|
249,590
|
—
|
|||||||||
Stock-based
compensation costs
|
2,085
|
2,439
|
1,139
|
|||||||||
Loss
on extinguishment of debt
|
2,166
|
—
|
—
|
|||||||||
Changes
in operating assets and liabilities, net of effects of purchases of
businesses
|
||||||||||||
Accounts
receivable
|
6,404
|
8,193
|
(9,052
|
)
|
||||||||
Inventories
|
(3,351)
|
2,719
|
477
|
|||||||||
Prepaid
expenses and other current assets
|
(3,559)
|
458
|
(381)
|
|||||||||
Accounts
payable
|
(3,127)
|
(2,265)
|
(975)
|
|||||||||
Accrued
liabilities
|
(192)
|
(1,176)
|
(4,255)
|
|||||||||
Net
cash provided by operating activities
|
59,427
|
66,679
|
44,989
|
|||||||||
Investing
Activities
|
||||||||||||
Purchases
of equipment
|
(673)
|
(481)
|
(488)
|
|||||||||
Proceeds
from sale of discontinued operations
|
7,993
|
—
|
—
|
|||||||||
Purchases
of intangible assets
|
—
|
—
|
(33)
|
|||||||||
Business
acquisition purchase price adjustments
|
—
|
(4,191)
|
(16)
|
|||||||||
Net
cash provided by (used for) investing activities
|
7,320
|
(4,672)
|
(537)
|
|||||||||
Financing
Activities
|
||||||||||||
Proceeds
from issuance of debt
|
296,046
|
—
|
—
|
|||||||||
Payment
of deferred financing costs
|
(6,627)
|
—
|
—
|
|||||||||
Repayment
of long-term debt
|
(350,250)
|
(32,888)
|
(52,125)
|
|||||||||
Purchase
of common stock for treasury
|
—
|
(16)
|
(7)
|
|||||||||
Net
cash used for financing activities
|
(60,831)
|
(32,904)
|
(52,132)
|
|||||||||
Increase
(decrease) in cash
|
5,916
|
29,103
|
(7,680)
|
|||||||||
Cash
- beginning of year
|
35,181
|
6,078
|
13,758
|
|||||||||
Cash
- end of year
|
$
|
41,097
|
$
|
35,181
|
$
|
6,078
|
||||||
Interest
paid
|
$
|
24,820
|
$
|
26,745
|
$
|
36,840
|
||||||
Income
taxes paid
|
$
|
15,494
|
$
|
9,844
|
$
|
9,490
|
See
accompanying notes.
F-6
Prestige
Brands Holdings, Inc.
1. Business
and Basis of Presentation
Nature
of Business
Prestige
Brands Holdings, Inc. (referred to herein as the “Company” which reference
shall, unless the context requires otherwise, be deemed to refer to Prestige
Brands Holdings, Inc. and all of its direct or indirect wholly-owned
subsidiaries on a consolidated basis) is engaged in the marketing, sales and
distribution of over-the-counter healthcare, personal care and household
cleaning brands to mass merchandisers, drug stores, supermarkets, club and
dollar stores primarily in the United States, Canada and certain other
international markets. Prestige Brands Holdings, Inc. is a holding
company with no assets or operations and is also the parent guarantor of the
senior credit facility and the senior notes more fully described in Note 10 to
the consolidated financial statements.
Basis
of Presentation
The
Company’s consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States. All
significant intercompany transactions and balances have been eliminated in
consolidation. The Company’s fiscal year ends on March 31st of each
year. References in these consolidated financial statements or notes
to a year (e.g., “2010”) mean the Company’s fiscal year ended on March 31st of
that year.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on the Company’s knowledge of current events and actions that the Company
may undertake in the future, actual results could differ from those
estimates. As discussed below, the Company’s most significant
estimates include those made in connection with the valuation of intangible
assets, sales returns and allowances, trade promotional allowances and inventory
obsolescence.
Cash
and Cash Equivalents
The
Company considers all short-term deposits and investments with original
maturities of three months or less to be cash
equivalents. Substantially all of the Company’s cash is held by a
large regional bank with headquarters in California. The Company does
not believe that, as a result of this concentration, it is subject to any
unusual financial risk beyond the normal risk associated with commercial banking
relationships.
Accounts
Receivable
The
Company extends non-interest-bearing trade credit to its customers in the
ordinary course of business. The Company maintains an allowance for
doubtful accounts receivable based upon historical collection experience and
expected collectability of the accounts receivable. In an effort to
reduce credit risk, the Company (i) has established credit limits for all of its
customer relationships, (ii) performs ongoing credit evaluations of customers’
financial condition, (iii) monitors the payment history and aging of customers’
receivables, and (iv) monitors open orders against an individual customer’s
outstanding receivable balance.
Inventories
Inventories
are stated at the lower of cost or fair value, where cost is determined by using
the first-in, first-out method. The Company provides an allowance for
slow moving and obsolete inventory, whereby it reduces inventories for the
diminution of value, resulting from product obsolescence, damage or other issues
affecting marketability, equal to the difference between the cost of the
inventory and its estimated market value. Factors utilized in the
determination of estimated market value include (i) current sales data and
historical return rates, (ii) estimates of future demand, (iii) competitive
pricing pressures, (iv) new product introductions, (v) product expiration dates,
and (vi) component and packaging obsolescence.
F-7
Property
and Equipment
Property
and equipment are stated at cost and are depreciated using the straight-line
method based on the following estimated useful lives:
Years
|
||
Machinery
|
5
|
|
Computer
equipment
|
3
|
|
Furniture
and fixtures
|
7
|
Leasehold
improvements are amortized over the lesser of the term of the lease or 5
years.
Expenditures
for maintenance and repairs are charged to expense as incurred. When
an asset is sold or otherwise disposed of, the cost and associated accumulated
depreciation are removed from the accounts and the resulting gain or loss is
recognized in the consolidated statement of operations.
Property
and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. An impairment loss is recognized if the carrying amount
of the asset exceeds its fair value.
Goodwill
The
excess of the purchase price over the fair market value of assets acquired and
liabilities assumed in purchase business combinations is classified as
goodwill. The Company does not amortize goodwill, but performs
impairment tests of the carrying value at least annually in the fourth fiscal
quarter of each year. The Company tests goodwill for impairment at
the reporting unit “brand” level which is one level below the operating segment
level.
Intangible
Assets
Intangible
assets, which are composed primarily of trademarks, are stated at cost less
accumulated amortization. For intangible assets with finite lives,
amortization is computed on the straight-line method over estimated useful lives
ranging from 3 to 30 years.
Indefinite-lived
intangible assets are tested for impairment at least annually in the fourth
fiscal quarter; however, at each reporting period an evaluation is made to
determine whether events and circumstances continue to support an indefinite
useful life. Intangible assets with finite lives are reviewed for
impairment whenever events or changes in circumstances indicate that their
carrying amounts exceed their fair values and may not be
recoverable. An impairment loss is recognized if the carrying amount
of the asset exceeds its fair value.
Deferred
Financing Costs
The
Company has incurred debt origination costs in connection with the issuance of
long-term debt. These costs are capitalized as deferred financing
costs and amortized using the straight-line method, which approximates the
effective interest method, over the term of the related debt.
Revenue
Recognition
Revenues
are recognized when the following criteria are met: (i) persuasive evidence of
an arrangement exists; (ii) the selling price is fixed or determinable; (iii)
the product has been shipped and the customer takes ownership and assumes the
risk of loss; and (iv) collection of the resulting receivable is reasonably
assured. The Company has determined that these criteria are met and
the transfer of the risk of loss generally occurs when product is received by
the customer and, accordingly, recognizes revenue at that
time. Provision is made for estimated discounts related to customer
payment terms and estimated product returns at the time of sale based on the
Company’s historical experience.
As is
customary in the consumer products industry, the Company participates in the
promotional programs of its customers to enhance the sale of its
products. The cost of these promotional programs varies based on the
actual number of units sold during a finite period of time. These
promotional programs consist of direct-to-consumer incentives such as coupons
and temporary price reductions, as well as incentives to the Company’s
customers, such as slotting fees and cooperative
advertising. Estimates of the costs of these promotional programs are
based on (i) historical sales experience, (ii) the current offering, (iii)
forecasted data, (iv) current market conditions, and (v) communication with
customer purchasing/marketing personnel. At the completion
of the promotional program, the estimated amounts are adjusted to actual
results.
F-8
Due to
the nature of the consumer products industry, the Company is required to
estimate future product returns. Accordingly, the Company records an
estimate of product returns concurrent with recording sales which is made after
analyzing (i) historical return rates, (ii) current economic trends, (iii)
changes in customer demand, (iv) product acceptance, (v) seasonality of the
Company’s product offerings, and (vi) the impact of changes in product
formulation, packaging and advertising.
Cost
of Sales
Cost of
sales includes product costs, warehousing costs, inbound and outbound shipping
costs, and handling and storage costs. Shipping, warehousing and
handling costs were $21.4 million for 2010, $22.5 million for 2009 and
$23.2 for 2008.
Advertising
and Promotion Costs
Advertising
and promotion costs are expensed as incurred. Slotting fees
associated with products are recognized as a reduction of
sales. Under slotting arrangements, the retailers allow the Company’s
products to be placed on the stores’ shelves in exchange for such
fees.
Stock-based
Compensation
The
Company recognizes stock-based compensation by measuring the cost of services to
be rendered based on the grant-date fair value of the equity
award. Compensation expense is to be recognized over the period an
employee is required to provide service in exchange for the award, generally
referred to as the requisite service period.
Income
Taxes
Deferred
tax assets and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse. A valuation allowance is established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
The Taxes
Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) prescribes a recognition threshold and measurement
attributes for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. As a result,
the Company has applied a more-likely-than-not recognition threshold for all tax
uncertainties. The guidance only allows the recognition of those tax
benefits that have a greater than 50% likelihood of being sustained upon
examination by the various taxing authorities.
The
Company is subject to taxation in the United States and various state and
foreign jurisdictions.
The
Company classifies penalties and interest related to unrecognized tax benefits
as income tax expense in the Statements of Operations.
Derivative
Instruments
Companies
are required to recognize derivative instruments as either assets or liabilities
in the consolidated Balance Sheets at fair value. The accounting for
changes in the fair value of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, further, on
the type of hedging relationship. For those derivative instruments
that are designated and qualify as hedging instruments, a company must designate
the hedging instrument, based upon the exposure being hedged, as a fair value
hedge, a cash flow hedge or a hedge of a net investment in a foreign
operation.
The
Company has designated its derivative financial instruments as cash flow hedges
because they hedge exposure to variability in expected future cash flows that
are attributable to interest rate risk. For these hedges, the
effective portion of the gain or loss on the derivative instrument is reported
as a component of other comprehensive income (loss) and reclassified into
earnings in the same line item (principally interest expense) associated with
the forecasted transaction in the same period or periods during which the hedged
transaction affects earnings. Any ineffective portion of the gain or
loss on the derivative instruments is recorded in results of operations
immediately. Cash flows from these instruments are classified as
operating activities.
Earnings
Per Share
Basic
earnings per share is calculated based on income available to common
stockholders and the weighted-average number of shares outstanding during the
reporting period. Diluted earnings per share is calculated based on
income available to common stockholders and the weighted-average number of
common and potential common shares outstanding during the reporting
period. Potential common shares, composed of the incremental common
shares issuable upon the exercise of stock options, stock appreciation rights
and unvested restricted shares, are included in the earnings per share
calculation to the extent that they are dilutive.
F-9
Reclassifications
Certain
prior period financial statement amounts have been reclassified to conform to
the current period presentation.
Recently
Issued Accounting Standards
In April
2010, the FASB issued authoritative guidance to provide clarification regarding
the classification requirements of a share-based payment award with an exercise
price denominated in the currency of a market in which a substantial portion of
the entity’s equity securities trade. The guidance states that such an award
should not be considered to contain a market, performance, or service condition
and should not be classified as a liability if it otherwise qualifies as an
equity classification. This guidance is effective for fiscal years beginning
after December 15, 2010, and for interim periods within those fiscal
years. The Company does not expect this guidance to have a material
impact on its consolidated financial statements.
In May
2009, the FASB issued guidance regarding subsequent events, which was
subsequently updated in February 2010. This guidance established general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. In particular, this guidance set forth the period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements, the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements, and the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. This guidance
was effective for financial statements issued for fiscal years and interim
periods ending after June 15, 2009, and was therefore adopted by the Company for
the second quarter 2009 reporting. The adoption did not have a significant
impact on the subsequent events that the Company reports, either through
recognition or disclosure, in the consolidated financial statements. In
February 2010, the FASB amended its guidance on subsequent events to remove the
requirement to disclose the date through which an entity has evaluated
subsequent events, alleviating conflicts with current SEC guidance. This
amendment was effective immediately and the Company therefore removed the
disclosure in this Annual Report.
In
January 2010, the FASB issued authoritative guidance requiring new disclosures
and clarifying some existing disclosure requirements about fair value
measurement. Under the new guidance, a reporting entity should (a)
disclose separately the amounts of significant transfers in and out of Level 1
and Level 2 fair value measurements and describe the reasons for the transfers,
and (b) present separately information about purchases, sales, issuances, and
settlements in the reconciliation for fair value measurements using significant
unobservable inputs. This guidance is effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those
disclosures are effective for fiscal years beginning after December 15, 2010,
and for interim periods within those fiscal years. The new
guidance requires only enhanced disclosures and the Company does not
expect this guidance to have a material impact on its consolidated financial
statements.
In
August 2009, the FASB issued authoritative guidance to provide
clarification on measuring liabilities at fair value when a quoted price in an
active market is not available. In these circumstances, a valuation
technique should be applied that uses either the quote of the liability when
traded as an asset, the quoted prices for similar liabilities or similar
liabilities when traded as assets, or another valuation technique consistent
with existing fair value measurement guidance, such as an income approach or a
market approach. The new guidance also clarifies that when estimating the
fair value of a liability, a reporting entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of the liability. This guidance
became effective beginning with the third quarter of the Company’s 2010 fiscal
year; however, the adoption of the new guidance did not have a material impact
on the Company’s financial position, results from operations or cash
flows.
In
June 2009, the FASB issued authoritative guidance to eliminate the
exception to consolidate a qualifying special-purpose entity, change the
approach to determining the primary beneficiary of a variable interest entity
and require companies to more frequently re-assess whether they must consolidate
variable interest entities. Under the new guidance, the primary
beneficiary of a variable interest entity is identified qualitatively as the
enterprise that has both (a) the power to direct the activities of a
variable interest entity that most significantly impact the entity’s
economic performance, and (b) the obligation to absorb losses of the entity
that could potentially be significant to the variable interest entity or the
right to receive benefits from the entity that could potentially be significant
to the variable interest entity. This guidance becomes effective for the
Company’s fiscal 2011 year-end and interim reporting periods. The Company
does not expect this guidance to have a material impact on its consolidated
financial statements.
In June
2009, the FASB established the FASB ASC as the source of authoritative
accounting principles recognized by the FASB to be applied in the preparation of
financial statements in conformity with generally accepted accounting
principles. The new guidance explicitly recognizes rules and
interpretive releases of the SEC under federal securities laws as authoritative
GAAP for SEC registrants. The new guidance became effective for our
financial statements issued for the three and six month periods ending on
September 30, 2009.
F-10
The
Derivatives and Hedging Topic of the FASB ASC was amended to require a company
with derivative instruments to disclose information to enable users of the
financial statements to understand (i) how and why the company uses derivative
instruments, (ii) how derivative instruments and related hedged items are
accounted for, and (iii) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows. Accordingly, the Derivatives and Hedging Topic now requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements. The amendments to the Derivatives
and Hedging Topic were effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The
implementation of the Derivatives and Hedging guidance required enhanced
disclosures of derivative instruments and the Company’s hedging activities and
did not have any impact on the Company’s financial position, results from
operations or cash flows.
Management
has reviewed and continues to monitor the actions of the various financial and
regulatory reporting agencies and is currently not aware of any other
pronouncement that could have a material impact on the Company’s consolidated
financial position, results of operations or cash flows.
2. Discontinued Operations and Sale
of Certain of Assets
In
October 2009, the Company sold certain assets related to the shampoo brands
previously included in its Personal Care products segment to an unrelated third
party. In accordance with the Discontinued Operations Topic of the
ASC, the Company reclassified the related assets as held for sale in the
consolidated balance sheets as of March 31, 2009 and reclassified the related
operating results as discontinued in the consolidated financial statements and
related notes for all periods presented. The Company recognized a
gain of $253,000 on a pre-tax basis and $157,000 net of tax effects on the sale
in the quarter ended December 31, 2009.
The
following table presents the assets related to the discontinued operations as of
March 31, 2009 (in thousands):
Inventory
|
$ | 1,038 | ||
Intangible
assets
|
8,472 | |||
|
||||
Total
assets held for sale
|
$ | 9,510 |
The
following table summarizes the results of discontinued operations (in
thousands):
Year Ended March 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Components
of Income
|
||||||||||||
Revenues
|
$ | 5,053 | $ | 9,568 | $ | 11,496 | ||||||
Income
before income taxes
|
1,121 | 1,896 | 2,994 |
The total
sale price for the assets was $9 million, with $8 million received upon closing,
and the remaining $1 million to be received on the first anniversary of the
closing.
3. Acquisition
of Businesses
Acquisition
of Wartner USA B.V.
On
September 21, 2006, the Company completed the acquisition of the ownership
interests of Wartner USA B.V., the owner of the Wartner brand of
over-the-counter wart treatment products. The Company expects that
the Wartner brand,
which is the #3 brand in the United States over-the-counter wart treatment
category, along with the acquired technology, will continue to enhance the
Company’s leadership in the category. Additionally, the Company
believes that the brand will continue to benefit from a targeted advertising and
marketing program, as well as the Company’s business model of outsourcing
manufacturing and the elimination of redundant operations. The
results from operations of the
Wartner brand have been included within the Company’s consolidated
financial statements as a component of the Over-the-Counter Healthcare segment
commencing September 21, 2006.
F-11
The
purchase price of the ownership interests was approximately $31.2 million,
including fees and expenses of the acquisition of $216,000 and the assumption of
approximately $5.0 million of contingent payments, with an originally estimated
fair value of $3.8 million, owed to the former owner of Wartner through
2011. The Company funded the cash acquisition price from operating
cash flows. During 2009, the Company paid the former owner $4.0
million in full satisfaction of all obligations due to such former
owner.
The
following table summarizes the fair values of the assets acquired and the
liabilities assumed at the date of acquisition.
(In
thousands)
|
||||
Inventory
|
$
|
769
|
||
Intangible
assets
|
29,600
|
|||
Goodwill
|
11,746
|
|||
Accrued
liabilities
|
(3,854
|
)
|
||
Deferred
tax liabilities
|
(7,000
|
)
|
||
$
|
31,261
|
The
amount allocated to intangible assets of $29.6 million includes $17.8 million
related to the Wartner
brand trademark which the Company estimates to have a useful life of 20 years,
as well as $11.8 million related to a patent estimated to have a useful life of
14 years. Goodwill resulting from this transaction was $11.7 million,
inclusive of a deferred income tax liability recorded for the difference between
the assigned values of assets acquired and liabilities assumed, and their
respective taxes bases. It is estimated that of such amount,
approximately $4.7 million will be deductible for income tax
purposes.
4. Accounts
Receivable
Accounts
receivable consist of the following (in thousands):
March 31,
|
||||||||
2010
|
2009
|
|||||||
Trade
accounts receivable
|
$
|
35,527
|
$
|
37,521
|
||||
Other
receivables
|
1,588
|
1,081
|
||||||
37,115
|
38,602
|
|||||||
Less
allowances for discounts, returns and uncollectible
accounts
|
(6,494
|
)
|
(2,577
|
)
|
||||
$
|
30,621
|
$
|
36,025
|
5. Inventories
Inventories
consist of the following (in thousands):
March 31,
|
||||||||
2010
|
2009
|
|||||||
Packaging
and raw materials
|
$
|
2,037
|
$
|
1,955
|
||||
Finished
goods
|
27,125
|
23,984
|
||||||
$
|
29,162
|
$
|
25,939
|
Inventories
are shown net of allowances for obsolete and slow moving inventory of $2.0
million and $1.4 million at March 31, 2010 and 2009,
respectively.
F-12
6. Property
and Equipment
Property
and equipment consist of the following (in thousands):
March 31,
|
||||||||
2010
|
2009
|
|||||||
Machinery
|
$
|
1,620
|
$
|
1,556
|
||||
Computer
equipment
|
1,570
|
1,021
|
||||||
Furniture
and fixtures
|
239
|
239
|
||||||
Leasehold
improvements
|
418
|
357
|
||||||
3,847
|
3,173
|
|||||||
Accumulated
depreciation
|
(2,451
|
)
|
(1,806
|
)
|
||||
$
|
1,396
|
$
|
1,367
|
The
Company recorded depreciation expense of $645,000, $548,000, $507,000 for 2010,
2009 and 2008, respectively.
7. Goodwill
A
reconciliation of the activity affecting goodwill by operating segment is as
follows (in thousands):
Over-the-
Counter
|
Household
|
Personal
|
||||||||||||||
Healthcare
|
Cleaning
|
Care
|
Consolidated
|
|||||||||||||
Balance
– March 31, 2008
|
||||||||||||||||
Goodwill
|
$ | 235,789 | $ | 72,549 | $ | 4,643 | $ | 312,981 | ||||||||
Accumulated
purchase price adjustments
|
(2,174 | ) | — | — | (2,174 | ) | ||||||||||
Accumulated
impairment losses
|
— | — | (1,892 | ) | (1,892 | ) | ||||||||||
233,615 | 72,549 | 2,751 | 308,915 | |||||||||||||
2009
purchase price adjustments
|
(3,988 | ) | — | — | (3,988 | ) | ||||||||||
2009
impairments
|
(125,527 | ) | (65,160 | ) | — | (190,687 | ) | |||||||||
Balance
– March 31, 2009
|
||||||||||||||||
Goodwill
|
235,789 | 72,549 | 4,643 | 312,981 | ||||||||||||
Accumulated
purchase price adjustments
|
(6,162 | ) | — | — | (6,162 | ) | ||||||||||
Accumulated
impairment losses
|
(125,527 | ) | (65,160 | ) | (1,892 | ) | (192,579 | ) | ||||||||
104,100 | 7,389 | 2,751 | 114,240 | |||||||||||||
2010
impairments
|
— | — | (2,751 | ) | (2,751 | ) | ||||||||||
Balance
– March 31, 2010
|
||||||||||||||||
Goodwill
|
$ | 235,789 | 72,549 | 4,643 | 312,981 | |||||||||||
Accumulated
purchase price adjustments
|
(6,162 | ) | — | — | (6,162 | ) | ||||||||||
Accumulated
impairment losses
|
(125,527 | ) | (65,160 | ) | (4,643 | ) | (195,330 | ) | ||||||||
104,100 | 7,389 | — | 111,489 |
At March
31, 2010, in conjunction with the annual test for goodwill impairment, the
Company recorded an impairment charge of $2.8 million to adjust the carrying
amounts of goodwill related to one reporting unit within the Personal Care
segment to its fair value, as determined by use of a discounted cash flow
methodology. The impairment was a result of distribution losses and
increased competition from private label store brands.
At March
31, 2009, in conjunction with the annual test for goodwill impairment, the
Company recorded an impairment charge aggregating $190.7 million to adjust the
carrying amounts of goodwill related to several reporting units within the
Over-the-Counter Healthcare and Household Cleaning segments to their fair values
as determined by use of a discounted cash flow methodology. These
charges were a consequence of the challenging economic environment experienced
in 2009, the dislocation of the debt and equity markets, and contracting
consumer demand for the Company’s product offerings.
The
discounted cash flow methodology is a widely-accepted valuation technique
utilized by market participants in the transaction evaluation process and has
been applied consistently. However, we did consider the Company’s
market capitalization at March 31, 2010 and 2009, as compared to the aggregate
fair values of our reporting units to assess the reasonableness of our estimates
pursuant to the discounted cash flow
methodology. Although the impairment charges represent
management’s best estimate, the estimates and assumptions made in assessing the
fair value of the Company’s reporting units and the valuation of the underlying
assets and liabilities are inherently subject to significant
uncertainties. Consequently, changing rates of interest and
inflation, declining sales or margins, increases in competition, changing
consumer preferences, technical advances or reductions in advertising and
promotion may require additional impairments in the future.
F-13
8. Intangible
Assets
A
reconciliation of the activity affecting intangible assets is as follows (in
thousands):
Year Ended March 31, 2010
|
||||||||||||||||
Indefinite
Lived
|
Finite
Lived
|
Non
Compete
|
||||||||||||||
Trademarks
|
Trademarks
|
Agreement
|
Totals
|
|||||||||||||
Carrying
Amounts
|
||||||||||||||||
Balance
– March 31, 2009
|
$
|
500,176
|
$
|
106,159
|
$
|
158
|
$
|
606,493
|
||||||||
Reclassifications
|
(45,605
|
)
|
45,605
|
—
|
—
|
|||||||||||
Additions
|
||||||||||||||||
Deletions
|
—
|
(500)
|
—
|
(500
|
)
|
|||||||||||
Impairments
|
—
|
—
|
—
|
—
|
||||||||||||
Balance
– March 31, 2010
|
$
|
454,571
|
$
|
151,264
|
$
|
158
|
$
|
605,993
|
||||||||
Accumulated
Amortization
|
||||||||||||||||
Balance
– March 31, 2009
|
$
|
—
|
$
|
37,214
|
$
|
142
|
$
|
37,356
|
||||||||
Additions
|
—
|
9,725
|
16
|
9,741
|
||||||||||||
Deletions
|
—
|
(333)
|
—
|
(333
|
)
|
|||||||||||
Balance
– March 31, 2010
|
$
|
—
|
$
|
46,606
|
$
|
158
|
$
|
46,764
|
||||||||
Intangibles,
net – March 31, 2010
|
$
|
454,571
|
$
|
104,658
|
$
|
—
|
$
|
559,229
|
Year Ended March 31, 2009
|
||||||||||||||||
Indefinite
Lived
|
Finite
Lived
|
Non
Compete
|
||||||||||||||
Trademarks
|
Trademarks
|
Agreement
|
Totals
|
|||||||||||||
Carrying
Amounts
|
||||||||||||||||
Balance
– March 31, 2008
|
$
|
544,963
|
$
|
119,470
|
$
|
196
|
$
|
664,629
|
||||||||
Additions
|
—
|
500
|
—
|
500
|
||||||||||||
Deletions
|
—
|
—
|
(38)
|
(38)
|
||||||||||||
Impairments
|
(44,787)
|
(13,811)
|
—
|
(58,598
|
)
|
|||||||||||
Balance
– March 31, 2009
|
$
|
500,176
|
$
|
106,159
|
$
|
158
|
$
|
606,493
|
||||||||
Accumulated
Amortization
|
||||||||||||||||
Balance
– March 31, 2008
|
$
|
—
|
$
|
28,377
|
$
|
141
|
$
|
28,518
|
||||||||
Additions
|
8,837
|
39
|
8,876
|
|||||||||||||
Deletions
|
—
|
—
|
(38)
|
(38)
|
||||||||||||
Balance
– March 31, 2009
|
$
|
—
|
$
|
37,214
|
$
|
142
|
$
|
37,356
|
||||||||
Intangibles,
net – March 31, 2009
|
$
|
500,176
|
$
|
68,945
|
$
|
16
|
$
|
569,137
|
In a
manner similar to goodwill, the Company completed a test for impairment of its
intangible assets during the fourth quarter of 2010. Accordingly, the
Company recorded no impairment charge as facts and circumstances indicated that
the fair values of the intangible assets for such segments exceeded their
carrying values.
In a
manner similar to goodwill, the Company completed a test for impairment of its
intangible assets during the fourth quarter of 2009. Accordingly, the
Company recorded an impairment charge aggregating $58.6 million to the
Over-the-Counter Healthcare and Household Cleaning segments as facts and
circumstances indicated that the carrying values of the intangible assets for
such segments exceeded their fair values and may not be
recoverable.
F-14
The
economic events experienced during the fiscal year ended March 31, 2009, as well
as the Company’s plans and projections for its brands indicated that several of
such brands can no longer support indefinite useful lives. Each of
these brands incurred an impairment charge during the three month period ended
March 31, 2009 and has been adversely affected by increased competition and the
macroeconomic environment in the United States. Consequently, at
April 1, 2009, management reclassified $45.6 million of previously
indefinite-lived intangibles to intangibles with definite
lives. Management estimates the remaining useful lives of these
intangibles to be 20 years.
The fair
values and the annual amortization charges of the reclassified intangibles are
as follows (in thousands):
Intangible
|
Fair Value
as of
March 31,
2009
|
Annual
Amortization
|
||||||
Household
Trademarks
|
$ | 34,888 | $ | 1,745 | ||||
OTC
Healthcare Trademark
|
10,717 | 536 | ||||||
$ | 45,605 | $ | 2,281 |
At March
31, 2010, intangible assets are expected to be amortized over a period of 3 to
30 years as follows (in thousands):
Year Ending March 31,
|
||||
2011
|
$
|
9,558
|
||
2012
|
9,160
|
|||
2013
|
8,612
|
|||
2014
|
7,797
|
|||
2015
|
6,147
|
|||
Thereafter
|
63,386
|
|||
$
|
104,660
|
9. Other
Accrued Liabilities
Other
accrued liabilities consist of the following (in thousands):
March 31,
|
||||||||
2010
|
2009
|
|||||||
Accrued
marketing costs
|
$
|
3,823
|
$
|
3,519
|
||||
Accrued
payroll
|
5,233
|
750
|
||||||
Accrued
commissions
|
285
|
312
|
||||||
Accrued
income taxes
|
372
|
679
|
||||||
Accrued
professional fees
|
1,089
|
1,906
|
||||||
Interest
swap obligation
|
—
|
2,152
|
||||||
Severance
|
929
|
—
|
||||||
Other
|
2
|
89
|
||||||
$
|
11,733
|
$
|
9,407
|
During
the second quarter of fiscal 2010, the Company completed a staff reduction
program to eliminate approximately 10% of its workforce. The accrued
severance balance as of March 31, 2010 is related to this reduction in workforce
and consists primarily of the remaining payments of salaries, bonuses and other
benefits for separated employees.
The
Company has reclassified the interest rate swap liability of $2.2 million as of
March 31, 2009 from accounts payable to accrued liabilities. The Company’s
interest rate swap liability of $2.2 million as of March 31, 2009 terminated
before March 26, 2010.
F-15
10.
Long-Term
Debt
Long-term
debt consists of the following (in thousands):
March 31,
|
||||||||
2010
|
2009
|
|||||||
Senior
secured term loan facility (“2010 Senior Term Loan”) that bears interest
at the Company’s option at either the prime rate plus a margin of 2.25% or
LIBOR plus 3.25% with a LIBOR floor of 1.5%. At March 31, 2010,
the average interest rate on the 2010 Senior Term Loan was
4.75%. Principal payments of $375,000 plus accrued interest are
payable quarterly, with the remaining principal due on the 2010 Senior
Term Loan maturity date. The 2010 Senior Term Loan matures on
March 24, 2016 and is collateralized by substantially all of the Company’s
assets.
|
$ |
150,000
|
$ |
—
|
||||
Senior
secured term loan facility (“Tranche B Term Loan Facility”) that bore
interest at the Company’s option at either the prime rate plus a margin of
1.25% or LIBOR plus a margin of 2.25%. The Tranche B Term Loan
Facility was repaid in full during 2010.
|
—
|
252,337
|
||||||
Senior
unsecured notes (“2010 Senior Notes”) that bear interest at 8.25% which
are payable on April 1st
and October 1st
of each year. The 2010 Senior Notes mature on April 1, 2018;
however the Company may redeem some or all of the 2010 Senior Notes at
redemption prices set forth in the indenture governing the 2010 Senior
Notes. The 2010 Senior Notes are unconditionally guaranteed by
Prestige Brands Holdings, Inc., and its domestic wholly-owned subsidiaries
other than Prestige Brands, Inc., the issuer. Each of these
guarantees is joint and several. There are no significant
restrictions on the ability of any of the guarantors to obtain funds from
their subsidiaries.
|
150,000
|
—
|
||||||
Senior
subordinated notes (“Senior Subordinated Notes”) that bore interest of
9.25% which was payable on April 15th
and October 15th
of each year. The balance outstanding on the Senior
Subordinated Notes as of March 31, 2010 was repaid in full subsequent to
year-end, on April 15th,
2010. The Senior Subordinated Notes were unconditionally
guaranteed by Prestige Brands Holdings, Inc., and its domestic
wholly-owned subsidiaries other than Prestige Brands, Inc., the
issuer.
|
28,087
|
126,000
|
||||||
328,087
|
378,337
|
|||||||
Current
portion of long-term debt
|
(29,587
|
)
|
(3,550
|
)
|
||||
298,500
|
374,787
|
|||||||
Less:
unamortized discount on the 2010 Senior Notes
|
(3,943)
|
—
|
||||||
Long-term
debt, net of unamortized discount
|
$
|
294,557
|
$
|
374,787
|
On March
24, 2010, Prestige Brands, Inc. issued the 2010 Senior Notes for $150 million,
with an interest rate of 8.25% and a maturity date of April 1, 2018; and entered
into a senior secured term loan facility for $150 million, with an interest rate
at LIBOR plus 3.25% with a LIBOR floor of 1.5% and a maturity date of March 24,
2016; and entered into a non-amortizing senior secured revolving credit facility
(“2010 Revolving Credit Facility”) in an aggregate principal amount of up to
$30.0 million. The Company’s 2010 Revolving Credit Facility was
available for maximum borrowings of $30.0 million at March 31,
2010.
The $150
million 2010 Senior Term Loan was entered into with a discount to lenders of
$1.8 million and net proceeds to the Company of $148.2 million, yielding a 5.0%
effective interest rate. The 2010 Senior Notes were issued at an
aggregate face value of $150 million with a discount to bondholders of $2.2
million and net proceeds to the Company of $147.8 million, yielding a 8.5%
effective interest rate.
In
connection with entering into the 2010 Senior Term Loan, the 2010 Revolving
Credit Facility and the 2010 Senior Notes, the Company incurred $7.3 million in
issuance costs, of which $6.6 million was capitalized as deferred financing
costs and $0.7 million expensed. The deferred financing costs are
being amortized over the terms of the related loan and notes.
In March
and April 2010, the Company retired its Tranche B Term Loan facility with an
original maturity date of April 11, 2016 and Senior Subordinated Notes that bore
interest at 9.25% with a maturity date of April 15, 2012. The Company
recognized a $2.7 million loss on the extinguishment of debt.
F-16
The 2010
Senior Notes are senior unsecured obligations of the Company and are guaranteed
on a senior unsecured basis. The 2010 Senior Notes are effectively
junior in right of payment to all existing and future secured obligations of the
Company, equal in right of payment with all existing and future senior
unsecured indebtedness of the Company, and senior in right of payment to all
future subordinated debt of the Company.
At any
time prior to April 1, 2014, the Company may redeem the 2010 Senior Notes in
whole or in part at a redemption price equal to 100% of the principal amount of
the notes redeemed, plus a “make-whole premium” calculated as set forth in the
Indenture, together with accrued and unpaid interest, if any, to the date of
redemption. The Company may redeem the 2010 Senior Notes in whole or
in part at any time on or after the 12-month period beginning April 1, 2014 at a
redemption price of 104.125% of the principal amount thereof, at a redemption
price of 102.063% of the principal amount thereof if the redemption occurs
during the 12-month period beginning on April 1, 2015, and at a redemption price
of 100% of the principal amount thereof on and after April 1, 2016, in each
case, plus accrued and unpaid interest, if any, to the redemption
date. In addition, on or prior to April 1, 2013, with the net cash
proceeds from certain equity offerings, the Company may redeem up to 35% in
aggregate principal amount of the 2010 Senior Notes at a redemption price of
108.250% of the principal amount of the 2010 Senior Notes to be redeemed, plus
accrued and unpaid interest to the redemption date.
The 2010
Senior Term Loan contains various financial covenants, including provisions that
require the Company to maintain certain leverage and interest coverage ratios
and not to exceed annual capital expenditures of $3.0 million. The
2010 Senior Term Loan and the 2010 Senior Notes also contain provisions that
restrict the Company from undertaking specified corporate actions, such as asset
dispositions, acquisitions, dividend payments, repurchase of common shares
outstanding, changes of control, incurrence of indebtedness, creation of liens,
making of loans and transactions with affiliates. Additionally, the
2010 Senior Term Loan and the 2010 Senior Notes contain cross-default provisions
whereby a default pursuant to the terms and conditions of certain indebtedness
will cause a default on the remaining indebtedness under the 2010 Senior Term
Loan, the 2010 Senior Notes and the Senior Subordinated Notes. At
March 31, 2010, the Company was in compliance with the applicable financial
covenants under its long-term indebtedness.
Future
principal payments required in accordance with the terms of the 2010 Senior Term
Loan, the 2010 Senior Notes and the Senior Subordinated Notes are as follows (in
thousands):
Year
Ending March 31
|
||||
2011
|
$
|
29,587
|
||
2012
|
1,500
|
|||
2013
|
1,500
|
|||
2014
|
1,500
|
|||
2015
|
1,500
|
|||
Thereafter
|
292,500
|
|||
$
|
328,087
|
F-17
11.
|
Fair
Value Measurements
|
As deemed
appropriate, the Company uses derivative financial instruments to mitigate the
impact of changing interest rates associated with its long-term debt
obligations. At March 31, 2010, the Company had no open financial
derivative financial obligations. While the Company has not entered into
derivative financial instruments for trading purposes, all of the Company’s
derivatives were over-the-counter instruments with liquid
markets. The notional, or contractual, amount of the Company’s
derivative financial instruments were used to measure the amount of
interest to be paid or received and did not represent an actual
liability. The Company accounted for the interest rate cap and swap
agreements as cash flow hedges.
In March
2005, the Company purchased interest rate cap agreements with a total notional
amount of $180.0 million, the terms of which were as follows:
Notional
Amount
|
Interest
Rate
Cap
Percentage
|
Expiration
Date
|
||||
(In
millions)
|
||||||
$
|
50.0
|
3.25
|
%
|
May
31, 2006
|
||
80.0
|
3.50
|
May
30, 2007
|
||||
50.0
|
3.75
|
May
30,
2008
|
The
Company entered into an interest rate swap agreement, effective March 26, 2008,
in the notional amount of $175.0 million, decreasing to $125.0 million at March
26, 2009 to replace and supplement the interest rate cap agreement that expired
on May 30, 2008. The Company agreed to pay a fixed rate of 2.88%
while receiving a variable rate based on LIBOR. The agreement
terminated on March 26, 2010, and was neither renewed nor replaced.
The Fair
Value Measurements and Disclosures Topic of the FASB ASC requires fair value to
be determined based on the exchange price that would be received for an asset or
paid to transfer a liability in the principal or most advantageous market
assuming an orderly transaction between market participants. The Fair
Value Measurements and Disclosures Topic established market (observable inputs)
as the preferred source of fair value to be followed by the Company’s
assumptions of fair value based on hypothetical transactions (unobservable
inputs) in the absence of observable market inputs.
Based
upon the above, the following fair value hierarchy was created:
Level
1 –
|
Quoted
market prices for identical instruments in active
markets,
|
|
Level
2 –
|
Quoted
prices for similar instruments in active markets, as well as quoted prices
for identical or similar instruments in markets that are not considered
active, and
|
|
Level
3 –
|
Unobservable
inputs developed by the Company using estimates and assumptions reflective
of those that would be utilized by a market
participant.
|
Quantitative
disclosures about the fair value of the Company’s derivative hedging instruments
are as follows:
Fair Value Measurements at March 31,
2010
|
||||||||||||||||
(In thousands)
Description
|
March 31,
2010
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Interest
Rate Swap Liability
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
F-18
Fair Value Measurements at March 31,
2009
|
||||||||||||||||
(In thousands)
Description
|
March 31,
2009
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Interest
Rate Swap Liability
|
$
|
2,152
|
$
|
—
|
$
|
2,152
|
$
|
—
|
Fair Value Measurements at March 31,
2008
|
||||||||||||||||
(In thousands)
Description
|
March 31,
2008
|
Quoted Prices
in Active
Markets
for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Interest
Rate Swap Liability
|
$
|
1,527
|
$
|
—
|
$
|
1,527
|
$
|
—
|
A summary
of the fair value of the Company’s derivatives instruments, their impact on the
consolidated statements of operations and comprehensive income and the amounts
reclassified from other comprehensive income is as follows (in
thousands):
For the Year Ended March 31,
2010
|
|||||||||||||||||||
March 31, 2010
|
Income
Statement
Account
|
Amount
Income
|
Amount
Gains
|
||||||||||||||||
Cash Flow Hedging
Instruments
|
Balance
Sheet
Location
|
Notional
Amount
|
Fair Value
Asset/
(Liability)
|
Gains/
Losses
Charged
|
(Expense)
Recognized
In Income
|
(Losses)
Recognized
In OCI
|
|||||||||||||
Interest
Rate Swap
|
Other
Accrued Liabilities
|
$ | — | $ | — |
Interest
Expense
|
$ | (2,866 | ) | $ | 2,152 |
For
the Year Ended March 31, 2009
|
|||||||||||||||||||
March
31, 2009
|
Income
Statement
Account
|
Amount
Income
|
Amount
Gains
|
||||||||||||||||
Cash
Flow Hedging
Instruments
|
Balance
Sheet
Location
|
Notional
Amount
|
Fair
Value
Asset/
(Liability)
|
Gains/
Losses
Charged
|
(Expense)
Recognized
In
Income
|
(Losses)
Recognized
In
OCI
|
|||||||||||||
Interest
Rate Swap
|
Other
Accrued Liabilities
|
$ | 125 | $ | (2,152 | ) |
Interest
Expense
|
$ | (502 | ) | $ | (625 | ) |
For the Year Ended March 31,
2008
|
|||||||||||||||||||
March 31, 2008
|
Income
Statement
Account
|
Amount
Income
|
Amount
Gains
|
||||||||||||||||
Cash Flow Hedging
Instruments
|
Balance
Sheet
Location
|
Notional
Amount
|
Fair Value
Asset/
(Liability)
|
Gains/
Losses
Charged
|
(Expense)
Recognized
In Income
|
(Losses)
Recognized
In OCI
|
|||||||||||||
Interest
Rate Swap
|
Other
Accrued Liabilities
|
$ | 175 | $ | (1,527 | ) |
Interest
Expense
|
$ | — | $ | (1,527 | ) |
F-19
The
Company recorded a charge to interest expense of $2.9 million during 2010
in connection with this interest rate swap agreement. At March 31,
2010, the Company did not participate in an interest rate swap
agreement.
At March
31, 2009, the fair value of the interest rate swap was $2.2
million. Such amount was included in current
liabilities. The determination of fair value is based on closing
prices for similar instruments traded in liquid over-the-counter
markets. The changes in the fair value of this interest rate swap
were recorded in Accumulated Other Comprehensive Income in the balance sheet due
to its designation as a cash flow hedge.
For
certain of our financial instruments, including cash, accounts receivable,
accounts payable and other current liabilities, the carrying amounts approximate
their respective fair values due to the relatively short maturity of these
amounts.
At March
31, 2010, the carrying value of the 2010 Senior Term Loan was $150.0 million.
The terms of the 2010 Senior Term Loan provide that the interest rate is
adjusted, at the Company’s option, on either a monthly or quarterly basis, to
the prime rate plus a margin of 2.25% or LIBOR, with a floor of 1.5%, plus a
margin of 3.25%. At March 31, 2010, the market value of the
Company’s 2010 Senior Term Loan was approximately $150.8
million.
At March
31, 2010, the carrying value of the Company’s 8.25% 2010 Senior Notes was $150.0
million. The market value of these notes was approximately $152.3 million at
March 31, 2010. The market values have been determined from
market transactions in the Company’s debt securities. Also at March
31, 2010, the Company maintained a residual balance of $28.1 million relating to
the Senior Subordinated Notes that remained outstanding at fiscal year end. The
$28.1 million balance was redeemed in full on April 15, 2010 at par
value.
12.
|
Stockholders’
Equity
|
The
Company is authorized to issue 250.0 million shares of common stock, $0.01 par
value per share, and 5.0 million shares of preferred stock, $0.01 par value per
share. The Board of Directors may direct the issuance of the
undesignated preferred stock in one or more series and determine preferences,
privileges and restrictions thereof.
Each
share of common stock has the right to one vote on all matters submitted to a
vote of stockholders. The holders of common stock are also entitled
to receive dividends whenever funds are legally available and when declared by
the Board of Directors, subject to prior rights of holders of all classes of
stock outstanding having priority rights as to dividends. No
dividends have been declared or paid on the Company’s common stock through March
31, 2010.
During
2009 and 2008, the Company repurchased 65,000 and 4,000 shares, respectively, of
restricted common stock from former employees pursuant to the provisions of the
various employee stock purchase agreements. The 2009 purchases were
at an average price of $0.24 per share while the 2008 purchases were at an
average purchase price of $1.70 per share. All of such shares
have been recorded as treasury stock. There were no share repurchases during
2010.
F-20
13.
|
Earnings
Per Share
|
The
following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
Year
Ended March 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Numerator
|
||||||||||||
Income
(loss) from continuing operations
|
$
|
31,262
|
$
|
(187,953
|
)
|
$
|
32,046
|
|||||
Income
from discontinued operations and gain on sale of discontinued
operations
|
853
|
1,177
|
1,873
|
|||||||||
Net
income (loss)
|
$
|
32,115
|
$
|
(186,776
|
)
|
$
|
33,919
|
|||||
Denominator
|
||||||||||||
Denominator
for basic earnings per share- weighted average shares
|
50,013
|
49,935
|
49,751
|
|||||||||
Dilutive
effect of unvested restricted common stock (including restricted stock
units), options and stock appreciation rights issued to employees and
directors
|
72
|
—
|
288
|
|||||||||
Denominator
for diluted earnings per share
|
50,085
|
49,935
|
50,039
|
|||||||||
Earnings
per Common Share:
|
||||||||||||
Basic
earnings (loss) per share from continuing operations
|
$
|
0.63
|
$
|
(3.76
|
)
|
$
|
0.64
|
|||||
Basic
earnings per share from discontinued operations and gain on sale of
discontinued operations
|
0.01
|
0.02
|
0.04
|
|||||||||
Basic
net earnings (loss) per share
|
$
|
0.64
|
$
|
(3.74
|
)
|
$
|
0.68
|
|||||
Diluted
earnings (loss) per share from continuing operations
|
$
|
0.62
|
$
|
(3.76
|
)
|
$
|
0.64
|
|||||
Diluted
earnings per share from discontinued operations and gain on sale of
discontinued operations
|
0.02
|
0.02
|
0.04
|
|||||||||
Diluted
net earnings (loss) per share
|
$
|
0.64
|
$
|
(3.74
|
)
|
$
|
0.68
|
At March
31, 2010, 204,892 shares of restricted stock granted to employees and restricted
stock units granted to Board members, subject only to time vesting, were
unvested and excluded from the calculation of basic earnings per share; however,
such shares were included in the calculation of diluted earnings per
share. Additionally, 82,202 shares of restricted stock granted to
employees have been excluded from the calculation of both basic and diluted
earnings per share because vesting of such shares is subject to contingencies
that were not met as of March 31, 2010. Lastly, at March 31, 2010,
there were options to purchase 1,330,337 shares of common stock outstanding that
were not included in the computation of diluted earnings per share because their
exercise price was greater than the average market price of the common stock,
and therefore, their inclusion would be antidilutive.
At March
31, 2009, 183,000 shares of restricted stock granted to employees have been
excluded from the calculation of both basic and diluted earnings per share since
vesting of such shares is subject to contingencies. Additionally, at
March 31, 2009, there were options to purchase 663,000 shares of common stock
outstanding that were not included in the computation of diluted earnings per
share because their exercise price was greater than the average market price of
the common stock, and therefore, their inclusion would be
antidilutive.
At March
31, 2008, 314,000 restricted shares issued to employees, subject only to
time-vesting, were unvested and excluded from the calculation of basic earnings
per share; however, such shares were included in the calculation of diluted
earnings per share. Additionally, at March 31, 2008, 324,000 shares
of restricted stock granted to management and employees, as well as 16,000 stock
appreciation rights have been excluded from the calculation of both basic and
diluted earnings per share since vesting of such shares is subject to
contingencies. Lastly, at March 31, 2008, there were options to
purchase 254,000 shares of common stock outstanding that were not included in
the computation of diluted earnings per share because their exercise price was
greater than the average market price of the common stock, and therefore, their
inclusion would be antidilutive.
F-21
14.
|
Share-Based
Compensation
|
In
connection with the Company’s initial public offering, the Board of Directors
adopted the 2005 Long-Term Equity Incentive Plan (“the Plan”) which provides for
the grant, to a maximum of 5.0 million shares, of restricted stock, stock
options, restricted stock units, deferred stock units and other equity-based
awards. Directors, officers and other employees of the Company and
its subsidiaries, as well as others performing services for the Company, are
eligible for grants under the Plan.
During
2010, net compensation costs charged against income and the related income tax
benefit recognized were $2.1 million and $790,000,
respectively. During the year management determined that performance
goals associated with the grants of stock to management and employees in May
2008 were met and recorded stock compensation costs accordingly. No
prior compensation costs were required to be reversed.
During
2009, net compensation costs charged against income and the related income tax
benefit recognized were $2.4 million and $924,000,
respectively. During the year management determined that the Company
would not meet the performance goals associated with the grants of stock to
management and employees in May 2007 and 2008. Therefore, management
reversed previously recorded stock compensation costs of $705,000 and $193,000
related to the May 2007 and May 2008 grants, respectively.
During
2008, net compensation costs charged against income, and the related tax
benefits recognized were $1.1 million and $433,000,
respectively. During the year management determined that the Company
would not meet the performance goals associated with the grants of restricted
stock to management and employees in October 2005, July 2006 and May
2007. Therefore, management reversed previously recorded stock-based
compensation costs of $538,000, $394,000 and $166,000 related to the October
2005, July 2006 and May 2007 grants, respectively.
Restricted
Shares
Restricted
shares granted to employees under the Plan generally vest in 3 to 5 years,
contingent on attainment of Company performance goals, including revenue and
earnings before income taxes, depreciation and amortization targets, or the
attainment of certain time vesting thresholds. The restricted share
awards provide for accelerated vesting if there is a change of control, as
defined in the plan or document pursuant to which the awards were
made. The fair value of nonvested restricted shares is determined as
the closing price of the Company’s common stock on the day preceding the grant
date. The weighted-average grant-date fair values during 2010, 2009
and 2008 were $7.09, $10.85 and $12.52, respectively.
A summary
of the Company’s restricted shares granted under the Plan is presented
below:
Nonvested Shares
|
Shares
(in thousands)
|
Weighted-Average
Grant-Date
Fair Value
|
||||||
Nonvested
at March 31, 2007
|
294.4 | $ | 11.05 | |||||
Granted
|
292.0 | 12.52 | ||||||
Vested
|
(24.8 | ) | 10.09 | |||||
Forfeited
|
(76.9 | ) | 12.35 | |||||
Nonvested
at March 31, 2008
|
484.7 | 11.78 | ||||||
Granted
|
303.5 | 10.85 | ||||||
Vested
|
(29.9 | ) | 10.88 | |||||
Forfeited
|
(415.9 | ) | 11.55 | |||||
Nonvested
at March 31, 2009
|
342.4 | 11.31 | ||||||
Granted
|
171.6 | 7.09 | ||||||
Vested
|
(47.8 | ) | 10.97 | |||||
Forfeited
|
(179.1 | ) | 11.28 | |||||
Nonvested
at March 31, 2010
|
287.1 | $ | 8.86 |
Options
The Plan
provides that the exercise price of the option granted shall be no less than the
fair market value of the Company’s common stock on the date the option is
granted. Options granted have a term of no greater than 10 years from
the date of grant and vest in accordance with a schedule determined at the
time the option is granted, generally 3 to 5 years. The option awards
provide for accelerated vesting if there is a change in
control.
F-22
The fair
value of each option award is estimated on the date of grant using the
Black-Scholes Option Pricing Model (“Black-Scholes Model”) that uses the
assumptions noted in the following table. Expected volatilities are
based on the historical volatility of the Company’s common stock and other
factors, including the historical volatilities of comparable
companies. The Company uses appropriate historical data, as well as
current data, to estimate option exercise and employee termination
behaviors. Employees that are expected to exhibit similar exercise or
termination behaviors are grouped together for the purposes of
valuation. The expected terms of the options granted are derived from
management’s estimates and consideration of information derived from the public
filings of companies similar to the Company and represent the period of time
that options granted are expected to be outstanding. The risk-free
rate represents the yield on U.S. Treasury bonds with a maturity equal to the
expected term of the granted option. The weighted-average grant-date
fair value of the options granted during 2010, 2009 and 2008 were $3.64,
$5.04 and $5.30, respectively.
Year
Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Expected
volatility
|
45.6
|
%
|
43.3
|
%
|
||||
Expected
dividends
|
—
|
—
|
||||||
Expected
term in years
|
7.0
|
6.0
|
||||||
Risk-free
rate
|
2.8
|
%
|
3.2
|
%
|
A summary
of option activity under the Plan is as follows:
Options
|
Shares
(in
thousands)
|
Weighted-Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
(in
thousands)
|
||||||||||||
Outstanding
at March 31, 2007
|
—
|
$
|
—
|
—
|
$
|
—
|
||||||||||
Granted
|
255.1
|
12.86
|
10.0
|
—
|
||||||||||||
Exercised
|
—
|
—
|
—
|
—
|
||||||||||||
Forfeited
or expired
|
(1.6
|
)
|
12.86
|
9.2
|
—
|
|||||||||||
Outstanding
at March 31, 2008
|
253.5
|
12.86
|
9.2
|
—
|
||||||||||||
Granted
|
413.2
|
10.91
|
10.0
|
—
|
||||||||||||
Exercised
|
—
|
—
|
—
|
—
|
||||||||||||
Forfeited
or expired
|
(4.1
|
)
|
11.83
|
9.2
|
—
|
|||||||||||
Outstanding
at March 31, 2009
|
662.6
|
11.65
|
8.8
|
—
|
||||||||||||
Granted
|
1,125.0
|
7.16
|
9.4
|
2,070.0
|
||||||||||||
Exercised
|
—
|
—
|
—
|
—
|
||||||||||||
Forfeited
or expired
|
(203.4
|
)
|
11.34
|
7.9
|
—
|
|||||||||||
Outstanding
at March 31, 2010
|
1,584.2
|
8.50
|
8.9
|
2,070.0
|
||||||||||||
Exercisable
at March 31, 2010
|
297.9
|
$
|
11.96
|
7.6
|
$
|
2,070.0
|
Since the
Company’s closing stock price of $9.00 at March 31, 2010 exceeded the exercise
price for the options granted in 2010, the aggregate intrinsic value of
outstanding options was $2.1 million. Since the exercise price of the
options exceeded the Company’s closing stock price of $5.18 at March 31, 2009
and $8.18 at March 31, 2008, the aggregate intrinsic value of outstanding
options was $0 at March 31, 2009 and 2008.
Stock
Appreciation Rights (“SARS”)
During
2007, the Board of Directors granted SARS to a group of selected executives;
however, there were no SARS granted during 2008, 2009 or 2010. The
terms of the SARS provide that on the vesting date, the executive will receive
the excess of the market price of the stock award over the market price of the
stock award on the date of issuance. The Board of Directors, in its
sole discretion, may settle the Company’s obligation to the executive in shares
of the Company’s common stock, cash, other securities of the Company or any
combination thereof.
F-23
The Plan
provides that the issuance price of a SAR shall be no less than the market price
of the Company’s common stock on the date the SAR is granted. SARS
may be granted with a term of no greater than 10 years from the date of grant
and will vest in accordance with a schedule determined at the time the SAR is
granted, generally 3 to 5 years. The weighted-average grant date
fair value of the SARS granted during 2007 was $3.68. The fair value
of each SAR award was estimated on the date of grant using the Black-Scholes
Model using the assumptions noted in the following table.
Year
Ended
March
31, 2007
|
||||
Expected
volatility
|
50.00
|
%
|
||
Expected
dividend
|
—
|
|||
Expected
term in years
|
2.75
|
|||
Risk-free
rate
|
5.00
|
%
|
The SARs
expired on March 31, 2009; and no compensation was paid because the grant-date
market price of the Company’s common stock exceeded the market value of the
Company’s common stock on the measurement date.
A summary
of SARS activity under the Plan is as follows:
SARS
|
Shares
(in
thousands)
|
Grant
Date
Stock
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
(in
thousands)
|
||||||||||||
Outstanding
at March 31, 2007
|
16.1
|
9.97
|
2.0
|
30,300
|
||||||||||||
Granted
|
—
|
—
|
—
|
—
|
||||||||||||
Forfeited
or expired
|
—
|
—
|
—
|
—
|
||||||||||||
Outstanding
at March 31, 2008
|
16.1
|
9.97
|
1.0
|
—
|
||||||||||||
Granted
|
—
|
—
|
—
|
—
|
||||||||||||
Forfeited
or expired
|
(16.1
|
)
|
(9.97
|
)
|
—
|
—
|
||||||||||
Outstanding
at March 31, 2009
|
—
|
$
|
—
|
—
|
$
|
—
|
||||||||||
Exercisable
at March 31, 2009
|
—
|
$
|
—
|
—
|
$
|
—
|
At March
31, 2010, there were $4.5 million of unrecognized compensation costs related to
nonvested share-based compensation arrangements under the Plan based on
management’s estimate of the shares that will ultimately vest. The Company expects to
recognize such costs over a weighted average period of 1.5
years. However, certain of the restricted shares vest upon the
attainment of Company performance goals and if such goals are not met, no
compensation costs would ultimately be recognized and any previously recognized
compensation cost would be reversed. The total fair value of shares
vested during 2010, 2009 and 2008, was $525,000, $325,000, and $277,000,
respectively. There were no options exercised during 2010, 2009 or
2008; hence there were no tax benefits realized during these
periods. At March 31, 2010, there were 3.0 million shares available
for issuance under the Plan.
F-24
15.
|
Income
Taxes
|
The
provision (benefit) for income taxes consists of the following (in
thousands):
Year
Ended March 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Current
|
||||||||||||
Federal
|
$
|
9,628
|
$
|
9,284
|
$
|
8,599
|
||||||
State
|
1,313
|
1,266
|
1,208
|
|||||||||
Foreign
|
415
|
218
|
386
|
|||||||||
Deferred
|
||||||||||||
Federal
|
9,113
|
(17,606
|
)
|
8,851
|
||||||||
State
|
1,901
|
(2,348
|
)
|
1,245
|
||||||||
$
|
22,370
|
$
|
(9,186
|
)
|
$
|
20,289
|
The
principal components of the Company’s deferred tax balances are as follows (in
thousands):
March
31,
|
||||||||
2010
|
2009
|
|||||||
Deferred
Tax Assets
|
||||||||
Allowance
for doubtful accounts and sales returns
|
$
|
2,670
|
$
|
1,152
|
||||
Inventory
capitalization
|
644
|
574
|
||||||
Inventory
reserves
|
806
|
553
|
||||||
Net
operating loss carryforwards
|
663
|
747
|
||||||
Property
and equipment
|
20
|
8
|
||||||
State
income taxes
|
4,964
|
4,125
|
||||||
Accrued
liabilities
|
502
|
315
|
||||||
Interest
rate derivative instruments
|
—
|
818
|
||||||
Other
|
1,938
|
1,511
|
||||||
Deferred
Tax Liabilities
|
||||||||
Intangible
assets
|
(117,999)
|
(103,764
|
)
|
|||||
$
|
(105,792)
|
$
|
(93,961
|
)
|
At March
31, 2010, Medtech Products Inc., a wholly-owned subsidiary of the Company, had a
net operating loss carryforward of approximately $1.9 million which may be used
to offset future taxable income of the consolidated group and begins to expire
in 2020. The net operating loss carryforward is subject to an annual
limitation as to usage under Internal Revenue Code Section 382 of approximately
$240,000.
F-25
A
reconciliation of the effective tax rate compared to the statutory U.S. Federal
tax rate is as follows:
Year
Ended March 31,
|
||||||||||||||||||||||||
(In
thousands)
|
2010
|
2009
|
2008
|
|||||||||||||||||||||
%
|
%
|
%
|
||||||||||||||||||||||
Income
tax provision at statutory rate
|
$
|
19,069
|
35.0
|
$
|
(68,586
|
)
|
(35.0
|
)
|
$
|
18,973
|
35.0
|
|||||||||||||
Foreign
tax provision
|
(36)
|
(0.1)
|
83
|
—
|
16
|
—
|
||||||||||||||||||
State
income taxes, net of federal income tax benefit
|
1,662
|
3.1
|
(5,467
|
)
|
(2.8
|
)
|
1,284
|
2.4
|
||||||||||||||||
Increase
(decrease) in net deferred tax liability resulting from an increase
(decrease) in the effective state tax rate
|
597
|
1.1
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Goodwill
|
1,039
|
1.9
|
64,770
|
33.1
|
—
|
—
|
||||||||||||||||||
Other
|
39
|
0.1
|
14
|
—
|
16
|
—
|
||||||||||||||||||
Provision
for income taxes
|
$
|
22,370
|
41.1
|
$
|
(9,186
|
)
|
(4.7
|
)
|
$
|
20,289
|
37.4
|
Uncertain
tax liability activity is as follows:
2010
|
2009
|
|||||||
(In
thousands)
|
||||||||
Balance
– beginning of year
|
$
|
225
|
$
|
—
|
||||
Additions
based on tax positions related to the current
year
|
90
|
225
|
||||||
Balance
– end of year
|
$
|
315
|
$
|
225
|
The
Company recognizes interest and penalties related to uncertain tax positions as
a component of income tax expense. For 2010, 2009, and 2008, the
Company did not incur any interest or penalties related to income taxes.
The Company does not anticipate any significant events or circumstances
that would cause a change to these uncertainties during the ensuing
year. The Company is subject to taxation in the United States and
various state and foreign jurisdictions and is generally open to examination
from the year ended March 31, 2007 forward.
Commitments
and Contingencies
|
DenTek Oral Care, Inc.
Litigation
In April
2007, the Company filed a lawsuit in the U.S. District Court in the Southern
District of New York against DenTek Oral Care, Inc. (“DenTek”) alleging (i)
infringement of intellectual property associated with The Doctor’s NightGuard dental
protector which is used for the protection of teeth from nighttime teeth
grinding; and (ii) the violation of unfair competition and consumer protection
laws. On October 4, 2007, the Company filed a Second Amended
Complaint in which it named Kelly M. Kaplan (“Kaplan”), Raymond Duane (“Duane”)
and C.D.S. Associates, Inc. (“CDS”) as additional defendants in this action and
added other claims to the previously filed complaint. Kaplan and
Duane were formerly employed by the Company and CDS is a corporation controlled
by Duane. In the Second Amended Complaint, the Company has asserted
claims for patent, trademark and copyright infringement, unfair competition,
unjust enrichment, violation of New York’s Consumer Protection Act, breach of
contract, tortious interference with contractual and business relations, civil
conspiracy and trade secret misappropriation.
In
October 2008, DenTek, Kaplan, Duane and CDS filed Answers to the Second Amended
Complaint. In their Answers, each of DenTek, Duane and CDS has
asserted counterclaims against the Company. DenTek’s counterclaims
allege false advertising, violation of New York consumer protection statutes and
unfair competition relating to The Doctor’s NightGuard Classic
dental protector. Duane’s counterclaim is a contractual
indemnity claim seeking to recover attorneys’ fees pursuant to the release
between Duane and Dental Concepts LLC (“Dental Concepts”), a
predecessor-in-interest to Medtech Products Inc. (“Medtech”), plaintiff in the
DenTek litigation and a wholly-owned subsidiary of Prestige Brands Holdings,
Inc. CDS’s counterclaim alleges a breach of the consulting agreement
between CDS and Dental Concepts.
F-26
On March
24, 2009, Duane submitted a petition for a Chapter 7 bankruptcy with the United
States Bankruptcy Court for the District of Nevada. The New York
Court retains jurisdiction over Duane for injunctive relief arising out of the
New York action while the Nevada Court retains exclusive jurisdiction over the
dischargeability of Medtech’s damage claims against Duane and other issues
affecting the bankruptcy.
On March
25, 2010, Medtech settled all of the claims and counterclaims involving DenTek
in the law suit on terms mutually agreeable to Medtech and DenTek. No
payment by Medtech or the Company is required as part of the
settlement.
The
Company’s management believes that the counterclaims asserted by Duane and CDS
are legally deficient and that it has meritorious defenses to the
counterclaims. The Company intends to vigorously defend against the
counterclaims, which, if adversely determined against the Company, would not, in
the opinion of management, have a material adverse effect on the
Company.
San Francisco Technology
Inc. Litigation
On April
5, 2010, Medtech was served with a Complaint filed by San Francisco Technology
Inc. (“SFT”) in the U.S. District Court for the Northern District of California,
San Jose Division. In the Complaint, SFT asserted a qui tam action against
Medtech alleging false patent markings with the intent to deceive the
public regarding Medtech’s two Dermoplast®
products. Medtech has filed a Motion to Dismiss or Stay and a Motion
to Sever and Transfer Venue to the Southern District of New York and is awaiting
decisions on the pending Motions. Medtech intends to vigorously
defend against the Complaint.
In
addition to the matters described above, the Company is involved from time to
time in other routine legal matters and other claims incidental to its
business. The Company reviews outstanding claims and proceedings
internally and with external counsel as necessary to assess probability and
amount of potential loss. These assessments are re-evaluated at each
reporting period and as new information becomes available to determine whether a
reserve should be established or if any existing reserve should be
adjusted. The actual cost of resolving a claim or proceeding
ultimately may be substantially different than the amount of the recorded
reserve. In addition, because it is not permissible under GAAP to
establish a litigation reserve until the loss is both probable and estimable, in
some cases there may be insufficient time to establish a reserve prior to the
actual incurrence of the loss (upon verdict and judgment at trial, for example,
or in the case of a quickly negotiated settlement). The Company
believes the resolution of routine matters and other incidental claims, taking
into account reserves and insurance, will not have a material adverse effect on
its business, financial condition or results from operations.
Lease
Commitments
The
Company has operating leases for office facilities and equipment in New
York and Wyoming, which expire at various dates through 2014.
The
following summarizes future minimum lease payments for the Company’s operating
leases (in thousands):
Facilities
|
Equipment
|
Total
|
||||||||||
Year
Ending March 31,
|
||||||||||||
2011
|
$
|
559
|
$
|
74
|
$
|
633
|
||||||
2012
|
577
|
40
|
617
|
|||||||||
2013
|
596
|
17
|
613
|
|||||||||
2014
|
50
|
—
|
50
|
|||||||||
$
|
1,782
|
$
|
131
|
$
|
1,913
|
Rent
expense for 2010, 2009 and 2008 was $753,000, $612,000 and $597,000,
respectively.
F-27
Purchase
Commitments
The
Company has entered into a 10 year supply agreement for the exclusive
manufacture of a portion of one of its household cleaning
products. Although the Company is committed under the supply
agreement to pay the minimum amounts set forth in the table below, the total
commitment is less than 10 percent of the estimated purchases that are expected
to be made during the course of the supply agreement.
(In
thousands)
|
||||
Year
Ending March 31,
|
||||
2011
|
$ | 10,703 | ||
2012
|
6,724 | |||
2013
|
1,166 | |||
2014
|
1,136 | |||
2015
|
1,105 | |||
Thereafter
|
4,673 | |||
$ | 25,507 |
Concentrations
of Risk
|
The
Company’s sales are concentrated in the areas of over-the-counter healthcare,
household cleaning and personal care products. The Company sells its
products to mass merchandisers, food and drug accounts, and dollar and club
stores. During 2010, 2009 and 2008, approximately 62.3%, 60.8% and
60.3%, respectively, of the Company’s total sales were derived from its four
major brands. During 2010, 2009 and 2008, approximately
24.6%, 25.9% and 23.1%, respectively, of the Company’s sales were made to
one customer. At March 31, 2010, approximately 22.3% of accounts
receivable were owed by the same customer.
The
Company manages product distribution in the continental United States through a
main distribution center in St. Louis, Missouri. A serious
disruption, such as a flood or fire, to the main distribution center could
damage the Company’s inventories and could materially impair the Company’s
ability to distribute its products to customers in a timely manner or at a
reasonable cost. The Company could incur significantly higher costs
and experience longer lead times associated with the distribution of its
products to its customers during the time that it takes the Company to reopen or
replace its distribution center. As a result, any such disruption
could have a material adverse affect on the Company’s sales and profitability.
At March
31, 2010, we had relationships with over 40 third-party
manufacturers. Of those, we had long-term contracts with 20
manufacturers that produced items that accounted for approximately 68.7% of our
gross sales for 2010 compared to 18 manufacturers with long-term contracts
that produced approximately 64.0% of gross sales in 2009. The fact
that we do not have long-term contracts with certain manufacturers means that
they could cease manufacturing these products at any time and for any reason, or
initiate arbitrary and costly price increases which could have a material
adverse effect on our business, financial condition and results from
operations.
F-28
18.
|
Business
Segments
|
Segment
information has been prepared in accordance with Segment Topic of the FASB ASC.
The Company’s operating and reportable segments consist of (i) Over-the-Counter
Healthcare, (ii) Household Cleaning and (iii) Personal Care.
There
were no inter-segment sales or transfers during any of the periods
presented. The Company evaluates the performance of its operating
segments and allocates resources to them based primarily on contribution
margin.
The table
below summarizes information about the Company’s operating and reportable
segments.
Year
Ended March 31, 2010
|
||||||||||||||||
Over-the-
Counter
|
Household
|
Personal
|
||||||||||||||
Healthcare
|
Cleaning
|
Care
|
Consolidated
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
sales
|
$
|
177,313
|
$
|
108,797
|
$
|
10,812
|
$
|
296,922
|
||||||||
Other
revenues
|
3,150
|
1,899
|
52
|
5,101
|
||||||||||||
Total
revenues
|
180,463
|
110,696
|
10,864
|
302,023
|
||||||||||||
Cost
of sales
|
66,049
|
72,118
|
6,420
|
144,587
|
||||||||||||
Gross
profit
|
114,414
|
38,578
|
4,444
|
157,436
|
||||||||||||
Advertising
and promotion
|
24,220
|
6,659
|
357
|
31,236
|
||||||||||||
Contribution
margin
|
$
|
90,194
|
$
|
31,919
|
$
|
4,087
|
126,200
|
|||||||||
Other
operating expenses
|
44,747
|
|||||||||||||||
Impairment
of goodwill
|
2,751
|
|||||||||||||||
Operating
income
|
78,702
|
|||||||||||||||
Other
expenses
|
25,591
|
|||||||||||||||
Provision
for income taxes
|
21,849
|
|||||||||||||||
Income
from continuing operations
|
31,262
|
|||||||||||||||
Income
from discontinued operations, net of income tax
|
696
|
|||||||||||||||
Gain
on sale of discontinued operations, net of income tax
|
157
|
|||||||||||||||
Net
income
|
$
|
32,115
|
Year
Ended March 31, 2009
|
||||||||||||||||
Over-the-
Counter
|
Household
|
Personal
|
||||||||||||||
Healthcare
|
Cleaning
|
Care
|
Consolidated
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
sales
|
$
|
176,878
|
$
|
113,923
|
$
|
10,136
|
$
|
300,937
|
||||||||
Other
revenues
|
97
|
2,092
|
21
|
2,210
|
||||||||||||
Total
revenues
|
176,975
|
116,015
|
10,157
|
303,147
|
||||||||||||
Cost
of sales
|
63,459
|
74,457
|
6,280
|
144,196
|
||||||||||||
Gross
profit
|
113,516
|
41,558
|
3,877
|
158,951
|
||||||||||||
Advertising
and promotion
|
29,695
|
7,625
|
457
|
37,777
|
||||||||||||
Contribution
margin
|
$
|
83,821
|
$
|
33,933
|
$
|
3,420
|
121,174
|
|||||||||
Other
operating expenses
|
41,311
|
|||||||||||||||
Impairment
of goodwill and intangibles
|
249,285
|
|||||||||||||||
Operating
loss
|
(169,422)
|
|||||||||||||||
Other
expenses
|
28,436
|
|||||||||||||||
Income
tax benefit
|
(9,905)
|
|||||||||||||||
Loss
from continuing operations
|
(187,953)
|
|||||||||||||||
Income
from discontinued operations, net of tax
|
1,177
|
|||||||||||||||
Net
loss
|
$
|
(186,776)
|
F-29
Year
Ended March 31, 2008
|
||||||||||||||||
Over-the-
Counter
|
Household
|
Personal
|
||||||||||||||
Healthcare
|
Cleaning
|
Care
|
Consolidated
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
sales
|
$
|
183,641
|
$
|
119,224
|
$
|
10,260
|
$
|
313,125
|
||||||||
Other
revenues
|
51
|
1,903
|
28
|
1,982
|
||||||||||||
Total
revenues
|
183,692
|
121,127
|
10,288
|
315,107
|
||||||||||||
Cost
of sales
|
69,344
|
75,459
|
7,008
|
151,811
|
||||||||||||
Gross
profit
|
114,348
|
45,668
|
3,280
|
163,296
|
||||||||||||
Advertising
and promotion
|
26,188
|
7,483
|
572
|
34,243
|
||||||||||||
Contribution
margin
|
$
|
88,160
|
$
|
38,185
|
$
|
2,708
|
129,053
|
|||||||||
Other
operating expenses
|
40,633
|
|||||||||||||||
Operating
income
|
88,420
|
|||||||||||||||
Other
expenses
|
37,206
|
|||||||||||||||
Provision
for income taxes
|
19,168
|
|||||||||||||||
Income
from continuing operations
|
32,046
|
|||||||||||||||
Income
from discontinued operations, net of income tax
|
1,873
|
|||||||||||||||
Net
income
|
$
|
33,919
|
During
2010, 2009 and 2008, approximately 95.8%, 96.4% and 95.9% of the Company’s
sales were made to customers in the United States and Canada,
respectively. Other than the United States, no individual
geographical area accounted for more than 10% of net sales in any of the periods
presented. At March 31, 2010, substantially all of the Company’s
long-term assets were located in the United States of America and have been
allocated to the operating segments as follows:
Over-the-
Counter
|
Household
|
Personal
|
||||||||||||||
(In
thousands)
|
Healthcare
|
Cleaning
|
Care
|
Consolidated
|
||||||||||||
Goodwill
|
$
|
104,100
|
$
|
7,389
|
$
|
—
|
$
|
111,489
|
||||||||
Intangible
assets
|
||||||||||||||||
Indefinite
lived
|
334,750
|
119,821
|
—
|
454,571
|
||||||||||||
Finite
lived
|
65,961
|
33,143
|
5,554
|
104,658
|
||||||||||||
400,711
|
152,964
|
5,554
|
559,229
|
|||||||||||||
$
|
504,811
|
$
|
160,353
|
$
|
5,554
|
$
|
670,718
|
F-30
19.
Unaudited Quarterly Financial Information
Unaudited
quarterly financial information for 2010 and 2009 is as follows:
Year
Ended March 31, 2010
Quarterly
Period Ended
|
||||||||||||||||
(In
thousands, except for
per
share data)
|
June 30,
2009
|
September 30,
2009
|
December 31,
2009
|
March 31,
2010
|
||||||||||||
Total
revenues
|
$
|
71,012
|
$
|
84,181
|
$
|
75,448
|
$
|
71,382
|
||||||||
Cost
of sales
|
33,181
|
39,847
|
35,641
|
35,918
|
||||||||||||
Gross
profit
|
37,831
|
44,334
|
39,807
|
35,464
|
||||||||||||
Operating
expenses
|
||||||||||||||||
Advertising
and promotion
|
8,765
|
9,782
|
6,099
|
6,590
|
||||||||||||
General
and administrative
|
8,195
|
10,481
|
7,411
|
8,108
|
||||||||||||
Depreciation
and amortization
|
2,345
|
2,841
|
2,596
|
2,770
|
||||||||||||
Impairment
of goodwill
|
—
|
—
|
—
|
2,751
|
||||||||||||
19,305
|
23,104
|
16,106
|
20,219
|
|||||||||||||
Operating
income
|
18,526
|
21,230
|
23,701
|
15,245
|
||||||||||||
Net
interest expense
|
5,653
|
5,642
|
5,558
|
6,082
|
||||||||||||
Loss
on extinguishment of debt
|
—
|
—
|
—
|
2,656
|
||||||||||||
Income
from continuing operations before
income taxes
|
12,873
|
15,588
|
18,143
|
6,507
|
||||||||||||
Provision
for income taxes
|
4,879
|
5,908
|
7,807
|
3,255
|
||||||||||||
Income
from continuing operations
|
7,994
|
9,680
|
10,336
|
3,252
|
||||||||||||
Discontinued
Operations
|
||||||||||||||||
Income
from discontinued operations, net
of income tax
|
331
|
243
|
87
|
35
|
||||||||||||
Gain
on sale of discontinued operations, net
of income tax
|
—
|
—
|
157
|
—
|
||||||||||||
Net
income
|
$
|
8,325
|
$
|
9,923
|
$
|
10,580
|
$
|
3,287
|
||||||||
Basic
earnings per share:
|
||||||||||||||||
Income
from continuing operations
|
$
|
0.16
|
$
|
0.19
|
$
|
0.21
|
$
|
0.07
|
||||||||
Net
income
|
$
|
0.17
|
$
|
0.20
|
$
|
0.21
|
$
|
0.07
|
||||||||
Diluted
earnings per share:
|
||||||||||||||||
Income
from continuing operations
|
$
|
0.16
|
$
|
0.19
|
$
|
0.21
|
$
|
0.06
|
||||||||
Net
income
|
$
|
0.17
|
$
|
0.20
|
$
|
0.21
|
$
|
0.07
|
||||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
49,982
|
50,012
|
50,030
|
50,030
|
||||||||||||
Diluted
|
50,095
|
50,055
|
50,074
|
50,105
|
F-31
Year
Ended March 31, 2009
Quarterly
Period Ended
|
||||||||||||||||
(In
thousands, except for
per
share data)
|
June
30,
2008
|
September
30,
2008
|
December
31,
2008
|
March
31,
2009
|
||||||||||||
Total
revenues
|
$
|
70,997
|
$
|
85,540
|
$
|
77,966
|
$
|
68,644
|
||||||||
Cost
of sales
|
32,907
|
40,402
|
36,480
|
34,407
|
||||||||||||
Gross
profit
|
38,090
|
45,138
|
41,486
|
34,237
|
||||||||||||
Operating
expenses
|
||||||||||||||||
Advertising
and promotion
|
7,236
|
13,543
|
11,349
|
5,649
|
||||||||||||
General
and administrative
|
7,973
|
9,363
|
8,311
|
6,241
|
||||||||||||
Depreciation
and amortization
|
2,308
|
2,308
|
2,311
|
2,496
|
||||||||||||
Impairment
of goodwill and intangible assets
|
—
|
—
|
—
|
249,285
|
||||||||||||
17,517
|
25,214
|
21,971
|
263,671
|
|||||||||||||
Operating
income (loss)
|
20,573
|
19,924
|
19,515
|
(229,434)
|
||||||||||||
Net
interest expense
|
8,683
|
6,779
|
7,051
|
5,923
|
||||||||||||
Income
(loss) from continuing operations before income taxes
|
11,890
|
13,145
|
12,464
|
(235,357)
|
||||||||||||
Provision
(benefit) for income taxes
|
4,506
|
4,982
|
4,724
|
(24,117)
|
||||||||||||
Income
(loss) from continuing operations
|
7,384
|
8,163
|
7,740
|
(211,240)
|
||||||||||||
Discontinued
Operations
|
||||||||||||||||
Income
from discontinued operations, net of income tax
|
397
|
359
|
278
|
143
|
||||||||||||
Net
income (loss)
|
7,781
|
8,522
|
8,018
|
(211,097)
|
||||||||||||
Basic
earnings (loss) per share:
|
||||||||||||||||
Income
(loss) from continuing operations
|
$
|
0.15
|
$
|
0.16
|
$
|
0.15
|
$
|
(4.23)
|
||||||||
Net
income (loss)
|
$
|
0.16
|
$
|
0.17
|
$
|
0.16
|
$
|
(4.22)
|
||||||||
Diluted
earnings (loss) per share:
|
||||||||||||||||
Income
(loss) from continuing operations
|
$
|
0.15
|
$
|
0.16
|
$
|
0.15
|
$
|
(4.23)
|
||||||||
Net
income (loss)
|
$
|
0.16
|
$
|
0.17
|
$
|
0.16
|
$
|
(4.22)
|
||||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
49,880
|
49,924
|
49,960
|
49,976
|
||||||||||||
Diluted
|
50,035
|
50,037
|
50,040
|
49,976
|
F-32
20.
Condensed Consolidating Financial Statements
F-33
Condensed
Consolidating Statement of Operations
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Revenues
|
$ | — | $ | 184,573 | $ | 108,797 | $ | 3,552 | $ | — | $ | 296,922 | ||||||||||||
Other
Revenue
|
— | 3,201 | 1,900 | 1,297 | (1,297 | ) | 5,101 | |||||||||||||||||
Total
Revenue
|
— | 187,774 | 110,697 | 4,849 | (1,297 | ) | 302,023 | |||||||||||||||||
Cost
of Sales
|
||||||||||||||||||||||||
Cost
of Sales (exclusive of depreciation)
|
— | 72,311 | 72,119 | 1,454 | (1,297 | ) | 144,587 | |||||||||||||||||
Gross
Profit
|
— | 115,463 | 38,578 | 3,395 | — | 157,436 | ||||||||||||||||||
Advertising
and promotion
|
— | 23,180 | 6,659 | 1,397 | — | 31,236 | ||||||||||||||||||
General
and administrative
|
533 | 20,840 | 12,445 | 377 | — | 34,195 | ||||||||||||||||||
Depreciation
and amortization
|
384 | 8,208 | 1,889 | 71 | — | 10,552 | ||||||||||||||||||
Impairment
of goodwill and intangible assets
|
— | 2,751 | — | — | — | 2,751 | ||||||||||||||||||
Total
operating expenses
|
917 | 54,979 | 20,993 | 1,845 | — | 78,734 | ||||||||||||||||||
Operating
income (loss)
|
(917 | ) | 60,484 | 17,585 | 1,550 | — | 78,702 | |||||||||||||||||
Other
(income) expense
|
||||||||||||||||||||||||
Interest
income
|
(52,265 | ) | (9,368 | ) | — | (123 | ) | 61,755 | (1 | ) | ||||||||||||||
Interest
Expense
|
— | 70,466 | 14,215 | 10 | (61,755 | ) | 22,936 | |||||||||||||||||
Loss
on extinguishment of debt
|
— | 2,656 | — | — | — | 2,656 | ||||||||||||||||||
Miscellaneous
|
— | — | — | — | — | — | ||||||||||||||||||
Equity
in income of subsidiaries
|
(1,927 | ) | — | — | — | 1,927 | — | |||||||||||||||||
Total
other (income) expense
|
(54,192 | ) | 63,754 | 14,215 | (113 | ) | 1,927 | 25,591 | ||||||||||||||||
Income
(loss) from continuing operations before income taxes
|
53,275 | (3,270 | ) | 3,370 | 1,663 | (1,927 | ) | 53,111 | ||||||||||||||||
Provision
(benefit) for income taxes
|
21,160 | (1,200 | ) | 1,480 | 409 | — | 21,849 | |||||||||||||||||
Income
(loss) from continuing operations
|
32,115 | (2,070 | ) | 1,890 | 1,254 | (1,927 | ) | 31,262 | ||||||||||||||||
Discontinued
operations
|
||||||||||||||||||||||||
Income
from discontinued operations, net of income tax
|
— | 440 | 256 | — | — | 696 | ||||||||||||||||||
Gain
on sale of discontinued operations, net of income tax
|
— | 787 | (630 | ) | — | — | 157 | |||||||||||||||||
Net
income (loss)
|
$ | 32,115 | $ | (843 | ) | $ | 1,516 | $ | 1,254 | $ | (1,927 | ) | $ | 32,115 |
F-34
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Revenues
|
$ | — | $ | 183,773 | $ | 113,923 | $ | 3,241 | $ | — | $ | 300,937 | ||||||||||||
Other
Revenue
|
— | 76 | 2,093 | 1,639 | (1,598 | ) | 2,210 | |||||||||||||||||
Total
Revenue
|
— | 183,849 | 116,016 | 4,880 | (1,598 | ) | 303,147 | |||||||||||||||||
Cost
of Sales
|
||||||||||||||||||||||||
Cost
of Sales (exclusive of depreciation)
|
— | 70,092 | 74,457 | 1,245 | (1,598 | ) | 144,196 | |||||||||||||||||
Gross
Profit
|
— | 113,757 | 41,559 | 3,635 | — | 158,951 | ||||||||||||||||||
Advertising
and promotion
|
— | 28,824 | 7,625 | 1,328 | — | 37,777 | ||||||||||||||||||
General
and administrative
|
(34 | ) | 19,348 | 11,614 | 960 | — | 31,888 | |||||||||||||||||
Depreciation
and amortization
|
297 | 8,910 | 152 | 64 | — | 9,423 | ||||||||||||||||||
Impairment
of goodwill and intangible assets
|
— | 167,941 | 81,344 | — | — | 249,285 | ||||||||||||||||||
Total
operating expenses
|
263 | 225,023 | 100,735 | 2,352 | — | 328,373 | ||||||||||||||||||
Operating
income (loss)
|
(263 | ) | (111,266 | ) | (59,176 | ) | 1,283 | — | (169,422 | ) | ||||||||||||||
Other
(income) expense
|
||||||||||||||||||||||||
Interest
income
|
(52,751 | ) | (9,432 | ) | — | (40 | ) | 62,080 | (143 | ) | ||||||||||||||
Interest
Expense
|
— | 76,335 | 14,312 | 12 | (62,080 | ) | 28,579 | |||||||||||||||||
Loss
on extinguishment of debt
|
— | — | — | — | — | — | ||||||||||||||||||
Miscellaneous
|
— | — | — | — | — | — | ||||||||||||||||||
Equity
in income of subsidiaries
|
227,259 | — | — | — | (227,259 | ) | — | |||||||||||||||||
Total
other (income) expense
|
174,508 | 66,903 | 14,312 | (28 | ) | (227,259 | ) | 28,436 | ||||||||||||||||
Income
(loss) from continuing operations before income taxes
|
(174,771 | ) | (178,169 | ) | (73,488 | ) | 1,311 | 227,259 | (197,858 | ) | ||||||||||||||
Provision
(benefit) for income taxes
|
12,005 | (19,183 | ) | (3,175 | ) | 448 | — | (9,905 | ) | |||||||||||||||
Income
(loss) from continuing operations
|
(186,776 | ) | (158,986 | ) | (70,313 | ) | 863 | 227,259 | (187,953 | ) | ||||||||||||||
Discontinued
operations
|
||||||||||||||||||||||||
Income
from discontinued operations, net of income tax
|
— | 636 | 541 | — | — | 1,177 | ||||||||||||||||||
Gain
on sale of discontinued operations, net of income tax
|
— | — | — | — | — | — | ||||||||||||||||||
Net
income (loss)
|
$ | (186,776 | ) | $ | (158,350 | ) | $ | (69,772 | ) | $ | 863 | $ | 227,259 | $ | (186,776 | ) |
F-35
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Revenues
|
$ | — | $ | 190,439 | $ | 119,224 | $ | 3,462 | $ | — | $ | 313,125 | ||||||||||||
Other
Revenue
|
— | 80 | 1,903 | 830 | (831 | ) | 1,982 | |||||||||||||||||
Total
Revenue
|
— | 190,519 | 121,127 | 4,292 | (831 | ) | 315,107 | |||||||||||||||||
Cost
of Sales
|
||||||||||||||||||||||||
Cost
of Sales (exclusive of depreciation)
|
— | 75,920 | 75,459 | 1,263 | (831 | ) | 151,811 | |||||||||||||||||
Gross
Profit
|
— | 114,599 | 45,668 | 3,029 | — | 163,296 | ||||||||||||||||||
Advertising
and promotion
|
— | 25,639 | 7,482 | 1,122 | — | 34,243 | ||||||||||||||||||
General
and administrative
|
212 | 18,734 | 12,118 | 350 | — | 31,414 | ||||||||||||||||||
Depreciation
and amortization
|
256 | 8,738 | 163 | 62 | — | 9,219 | ||||||||||||||||||
Impairment
of goodwill and intangible assets
|
— | — | — | — | — | — | ||||||||||||||||||
Total
operating expenses
|
468 | 53,111 | 19,763 | 1,534 | — | 74,876 | ||||||||||||||||||
Operating
income (loss)
|
(468 | ) | 61,488 | 25,905 | 1,495 | — | 88,420 | |||||||||||||||||
Other
(income) expense
|
||||||||||||||||||||||||
Interest
income
|
(53,740 | ) | (9,481 | ) | — | (107 | ) | 62,653 | (675 | ) | ||||||||||||||
Interest
Expense
|
— | 86,271 | 14,450 | — | (62,653 | ) | 38,068 | |||||||||||||||||
Loss
on extinguishment of debt
|
— | — | — | — | — | — | ||||||||||||||||||
Miscellaneous
|
— | (187 | ) | — | — | — | (187 | ) | ||||||||||||||||
Equity
in income of subsidiaries
|
(454 | ) | — | — | — | 454 | — | |||||||||||||||||
Total
other (income) expense
|
(54,194 | ) | 76,603 | 14,450 | (107 | ) | 454 | 37,206 | ||||||||||||||||
Income
(loss) from continuing operations before income taxes
|
53,726 | (15,115 | ) | 11,455 | 1,602 | (454 | ) | 51,214 | ||||||||||||||||
Provision
(benefit) for income taxes
|
19,807 | (5,468 | ) | 4,433 | 396 | — | 19,168 | |||||||||||||||||
Income
(loss) from continuing operations
|
33,919 | (9,647 | ) | 7,022 | 1,206 | (454 | ) | 32,046 | ||||||||||||||||
Discontinued
operations
|
||||||||||||||||||||||||
Income
from discontinued operations, net of income tax
|
— | 808 | 1,065 | — | — | 1,873 | ||||||||||||||||||
Gain
on sale of discontinued operations, net of income tax
|
— | — | — | — | — | — | ||||||||||||||||||
Net
income (loss)
|
$ | 33,919 | $ | (8,839 | ) | $ | 8,087 | $ | 1,206 | $ | (454 | ) | $ | 33,919 |
F-36
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Current
assets
|
||||||||||||||||||||||||
Cash
and cash equivalents
|
$ | 40,644 | $ | — | $ | — | $ | 453 | $ | — | $ | 41,097 | ||||||||||||
Accounts
receivable
|
1,054 | 18,865 | 10,025 | 677 | — | 30,621 | ||||||||||||||||||
Inventories
|
— | 21,284 | 7,257 | 621 | — | 29,162 | ||||||||||||||||||
Deferred
income tax assets
|
2,315 | 3,639 | 398 | 1 | — | 6,353 | ||||||||||||||||||
Prepaid
expenses and other current assets
|
4,442 | 226 | 248 | 1 | — | 4,917 | ||||||||||||||||||
Current
assets of discontinued operations
|
— | — | — | — | — | — | ||||||||||||||||||
Total
current assets
|
48,455 | 44,014 | 17,928 | 1,753 | — | 112,150 | ||||||||||||||||||
Property
and equipment
|
841 | 236 | 297 | 22 | — | 1,396 | ||||||||||||||||||
Goodwill
|
— | 104,099 | 7,390 | — | — | 111,489 | ||||||||||||||||||
Intangible
assets
|
— | 405,770 | 152,964 | 495 | — | 559,229 | ||||||||||||||||||
Other
long-term assets
|
— | 7,148 | — | — | — | 7,148 | ||||||||||||||||||
Long-term
assets of discontinued operations
|
— | — | — | — | — | — | ||||||||||||||||||
Intercompany
receivable
|
712,224 | 729,069 | 90,251 | 3,989 | (1,535,533 | ) | — | |||||||||||||||||
Investment
in subsidiary
|
456,119 | — | — | — | (456,119 | ) | — | |||||||||||||||||
Total
Assets
|
$ | 1,217,639 | $ | 1,290,336 | $ | 268,830 | $ | 6,259 | $ | (1,991,652 | ) | $ | 791,412 | |||||||||||
Liabilities
and Stockholders’ Equity
|
||||||||||||||||||||||||
Current
liabilities
|
||||||||||||||||||||||||
Accounts
payable
|
$ | 2,526 | $ | 5,837 | $ | 4,060 | $ | 348 | $ | — | $ | 12,771 | ||||||||||||
Accrued
interest payable
|
— | 1,561 | — | — | — | 1,561 | ||||||||||||||||||
Other
accrued liabilities
|
10,234 | 4,960 | (3,476 | ) | 15 | — | 11,733 | |||||||||||||||||
Current
portion of long-term debt
|
— | 29,587 | — | — | — | 29,587 | ||||||||||||||||||
Total
current liabilities
|
12,760 | 41,945 | 584 | 363 | — | 55,652 | ||||||||||||||||||
Long-term
debt
|
||||||||||||||||||||||||
Principal
amount
|
— | 298,500 | — | — | — | 298,500 | ||||||||||||||||||
Less
unamortized discount
|
— | (3,943 | ) | — | — | — | (3,943 | ) | ||||||||||||||||
Long-term
debt, net of unamortized discount
|
— | 294,557 | — | — | — | 294,557 | ||||||||||||||||||
Deferred
income tax liabilities
|
(4 | ) | 91,828 | 20,224 | 96 | — | 112,144 | |||||||||||||||||
Intercompany
payable
|
703,389 | 656,711 | 174,500 | 933 | (1,535,533 | ) | — | |||||||||||||||||
Intercompany
equity in subs
|
172,435 | — | — | — | (172,435 | ) | — | |||||||||||||||||
Total
Liabilities
|
888,580 | 1,085,041 | 195,308 | 1,392 | (1,707,968 | ) | 462,353 | |||||||||||||||||
Stockholders’
Equity
|
||||||||||||||||||||||||
Common
Stock
|
502 | — | — | — | — | 502 | ||||||||||||||||||
Additional
paid-in capital
|
384,027 | 337,458 | 118,637 | 24 | (456,119 | ) | 384,027 | |||||||||||||||||
Treasury
stock
|
(63 | ) | — | — | — | — | (63 | ) | ||||||||||||||||
Accumulated
other comprehensive income (loss)
|
— | — | — | — | — | — | ||||||||||||||||||
Retained
earnings (accumulated deficit)
|
(55,407 | ) | (137,890 | ) | (45,115 | ) | 10,570 | 172,435 | (55,407 | ) | ||||||||||||||
Intercompany
Dividends
|
— | 5,727 | — | (5,727 | ) | — | — | |||||||||||||||||
Total
Stockholders’ Equity
|
329,059 | 205,295 | 73,522 | 4,867 | (283,684 | ) | 329,059 | |||||||||||||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 1,217,639 | $ | 1,290,336 | $ | 268,830 | $ | 6,259 | $ | (1,991,652 | ) | $ | 791,412 |
F-37
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Current
assets
|
||||||||||||||||||||||||
Cash
and cash equivalents
|
$ | 34,458 | $ | — | $ | — | $ | 723 | $ | — | $ | 35,181 | ||||||||||||
Accounts
receivable
|
519 | 24,443 | 10,575 | 488 | — | 36,025 | ||||||||||||||||||
Inventories
|
— | 19,659 | 5,964 | 316 | — | 25,939 | ||||||||||||||||||
Deferred
income tax assets
|
1,722 | 1,916 | 382 | 2 | — | 4,022 | ||||||||||||||||||
Prepaid
expenses and other current assets
|
470 | 820 | 67 | 1 | — | 1,358 | ||||||||||||||||||
Current
assets of discontinued operations
|
— | 666 | 372 | — | — | 1,038 | ||||||||||||||||||
Total
current assets
|
37,169 | 47,504 | 17,360 | 1,530 | — | 103,563 | ||||||||||||||||||
Property
and equipment
|
615 | 309 | 442 | 1 | — | 1,367 | ||||||||||||||||||
Goodwill
|
— | 106,850 | 7,390 | — | — | 114,240 | ||||||||||||||||||
Intangible
assets
|
— | 410,737 | 157,843 | 557 | — | 569,137 | ||||||||||||||||||
Other
long-term assets
|
— | 4,602 | — | — | — | 4,602 | ||||||||||||||||||
Long-term
assets of discontinued operations
|
— | 5,803 | 2,669 | — | — | 8,472 | ||||||||||||||||||
Intercompany
receivable
|
699,934 | 757,667 | 84,976 | 3,021 | (1,545,598 | ) | — | |||||||||||||||||
Investment
in subsidiary
|
456,119 | — | — | — | (456,119 | ) | — | |||||||||||||||||
Total
Assets
|
$ | 1,193,837 | $ | 1,333,472 | $ | 270,680 | $ | 5,109 | $ | (2,001,717 | ) | $ | 801,381 | |||||||||||
Liabilities
and Stockholders’ Equity
|
||||||||||||||||||||||||
Current
liabilities
|
||||||||||||||||||||||||
Accounts
payable
|
$ | 1,263 | $ | 6,363 | $ | 7,885 | $ | 387 | $ | — | $ | 15,898 | ||||||||||||
Accrued
interest payable
|
— | 5,371 | — | — | — | 5,371 | ||||||||||||||||||
Other
accrued liabilities
|
(2,052 | ) | 10,377 | 1,044 | 38 | — | 9,407 | |||||||||||||||||
Current
portion of long-term debt
|
— | 3,550 | — | — | — | 3,550 | ||||||||||||||||||
Total
current liabilities
|
(789 | ) | 25,661 | 8,929 | 425 | — | 34,226 | |||||||||||||||||
Long-term
debt
|
||||||||||||||||||||||||
Principal
amount
|
— | 374,787 | — | — | — | 374,787 | ||||||||||||||||||
Less
unamortized discount
|
— | — | — | — | — | — | ||||||||||||||||||
Long-term
debt, net of unamortized discount
|
— | 374,787 | — | — | — | 374,787 | ||||||||||||||||||
Deferred
income tax liabilities
|
(3 | ) | 83,841 | 14,046 | 99 | — | 97,983 | |||||||||||||||||
Intercompany
payable
|
725,882 | 643,045 | 175,699 | 972 | (1,545,598 | ) | — | |||||||||||||||||
Intercompany
equity in subs
|
174,362 | — | — | — | (174,362 | ) | — | |||||||||||||||||
Total
Liabilities
|
899,452 | 1,127,334 | 198,674 | 1,496 | (1,719,960 | ) | 506,996 | |||||||||||||||||
Stockholders’
Equity
|
||||||||||||||||||||||||
Common
Stock
|
501 | — | — | — | — | 501 | ||||||||||||||||||
Additional
paid-in capital
|
382,803 | 337,458 | 118,637 | 24 | (456,119 | ) | 382,803 | |||||||||||||||||
Treasury
stock
|
(63 | ) | — | — | — | — | (63 | ) | ||||||||||||||||
Accumulated
other comprehensive income (loss)
|
(1,334 | ) | — | — | — | — | (1,334 | ) | ||||||||||||||||
Retained
earnings (accumulated deficit)
|
(87,522 | ) | (137,047 | ) | (46,631 | ) | 9,316 | 174,362 | (87,522 | ) | ||||||||||||||
Intercompany
Dividends
|
— | 5,727 | — | (5,727 | ) | — | — | |||||||||||||||||
Total
Stockholders’ Equity
|
294,385 | 206,138 | 72,006 | 3,613 | (281,757 | ) | 294,385 | |||||||||||||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 1,193,837 | $ | 1,333,472 | $ | 270,680 | $ | 5,109 | $ | (2,001,717 | ) | $ | 801,381 |
F-38
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Operating
Activities
|
||||||||||||||||||||||||
Net
income (loss)
|
$ | 32,115 | $ | (843 | ) | $ | 1,516 | $ | 1,254 | $ | (1,927 | ) | $ | 32,115 | ||||||||||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||||||||||||||||||
Depreciation
and amortization
|
384 | 8,508 | 2,487 | 71 | — | 11,450 | ||||||||||||||||||
Gain
on sale of discontinued operations
|
— | (1,268 | ) | 1,015 | — | — | (253 | ) | ||||||||||||||||
Deferred
income taxes
|
(1,412 | ) | 6,261 | 6,162 | 1 | — | 11,012 | |||||||||||||||||
Amortization
of deferred financing costs
|
— | 1,926 | — | — | — | 1,926 | ||||||||||||||||||
Impairment
of goodwill and intangible assets
|
— | 2,751 | — | — | — | 2,751 | ||||||||||||||||||
Stock-based
compensation costs
|
2,085 | — | — | — | — | 2,085 | ||||||||||||||||||
Loss
on extinguishment of debt
|
— | 2,166 | — | — | — | 2,166 | ||||||||||||||||||
Changes
in operating assets and liabilities, net of effects of purchases of
businesses:
|
||||||||||||||||||||||||
Accounts
receivable
|
465 | 5,578 | 550 | (189 | ) | — | 6,404 | |||||||||||||||||
Inventories
|
— | (1,798 | ) | (1,247 | ) | (306 | ) | — | (3,351 | ) | ||||||||||||||
Prepaid
expenses and other current assets
|
(3,972 | ) | 594 | (181 | ) | — | — | (3,559 | ) | |||||||||||||||
Accounts
payable
|
1,263 | (526 | ) | (3,824 | ) | (40 | ) | — | (3,127 | ) | ||||||||||||||
Accrued
liabilities
|
(3,217 | ) | 7,571 | (4,522 | ) | (24 | ) | — | (192 | ) | ||||||||||||||
Net
cash provided by operating activities
|
27,711 | 30,920 | 1,956 | 767 | (1,927 | ) | 59,427 | |||||||||||||||||
Investing
Activities
|
||||||||||||||||||||||||
Purchases
of equipment
|
(610 | ) | (33 | ) | — | (30 | ) | — | (673 | ) | ||||||||||||||
Proceeds
from sale of discontinued operations
|
(1,000 | ) | 4,476 | 4,517 | — | — | 7,993 | |||||||||||||||||
Purchases
of intangible assets
|
— | — | — | — | — | — | ||||||||||||||||||
Business
acquisition purchase price adjustments
|
— | — | — | — | — | — | ||||||||||||||||||
Net
cash provided by (used for) investing activities
|
(1,610 | ) | 4,443 | 4,517 | (30 | ) | — | 7,320 | ||||||||||||||||
Financing
Activities
|
||||||||||||||||||||||||
Proceeds
from issuance of debt
|
— | 296,046 | — | — | — | 296,046 | ||||||||||||||||||
Payment
of deferred financing costs
|
— | (6,627 | ) | — | — | — | (6,627 | ) | ||||||||||||||||
Repayment
of long-term debt
|
— | (350,250 | ) | — | — | — | (350,250 | ) | ||||||||||||||||
Purchase
of common stock for treasury
|
— | — | — | — | — | — | ||||||||||||||||||
Intercompany
activity, net
|
(19,915 | ) | 25,468 | (6,473 | ) | (1,007 | ) | 1,927 | — | |||||||||||||||
Net
cash used for financing activities
|
(19,915 | ) | (35,363 | ) | (6,473 | ) | (1,007 | ) | 1,927 | (60,831 | ) | |||||||||||||
Increase
(decrease) in cash
|
6,186 | — | — | (270 | ) | — | 5,916 | |||||||||||||||||
Cash
– beginning of year
|
34,458 | — | — | 723 | — | 35,181 | ||||||||||||||||||
Cash
– end of year
|
$ | 40,644 | $ | — | $ | — | $ | 453 | $ | — | $ | 41,097 |
F-39
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Operating
Activities
|
||||||||||||||||||||||||
Net
income (loss)
|
$ | (186,776 | ) | $ | (158,350 | ) | $ | (69,772 | ) | $ | 863 | $ | 227,259 | $ | (186,776 | ) | ||||||||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||||||||||||||||||
Depreciation
and amortization
|
297 | 9,509 | 1,349 | 64 | — | 11,219 | ||||||||||||||||||
Gain
on sale of discontinued operations
|
— | — | — | — | — | — | ||||||||||||||||||
Deferred
income taxes
|
(687 | ) | (17,623 | ) | (1,641 | ) | (4 | ) | — | (19,955 | ) | |||||||||||||
Amortization
of deferred financing costs
|
— | 2,233 | — | — | — | 2,233 | ||||||||||||||||||
Impairment
of goodwill and intangible assets
|
— | 168,246 | 81,344 | — | — | 249,590 | ||||||||||||||||||
Stock-based
compensation costs
|
2,439 | — | — | — | — | 2,439 | ||||||||||||||||||
Loss
on extinguishment of debt
|
— | — | — | — | — | — | ||||||||||||||||||
Changes
in operating assets and liabilities, net of effects of purchases of
businesses:
|
||||||||||||||||||||||||
Accounts
receivable
|
(307 | ) | 5,855 | 2,065 | 580 | — | 8,193 | |||||||||||||||||
Inventories
|
— | 1,658 | 833 | 228 | — | 2,719 | ||||||||||||||||||
Prepaid
expenses and other current assets
|
268 | 237 | 6 | (53 | ) | — | 458 | |||||||||||||||||
Accounts
payable
|
234 | 203 | (2,141 | ) | (561 | ) | — | (2,265 | ) | |||||||||||||||
Accrued
liabilities
|
(12,407 | ) | 12,659 | (1,296 | ) | (132 | ) | — | (1,176 | ) | ||||||||||||||
Net
cash provided by operating activities
|
(196,939 | ) | 24,627 | 10,747 | 985 | 227,259 | 66,679 | |||||||||||||||||
Investing
Activities
|
||||||||||||||||||||||||
Purchases
of equipment
|
(440 | ) | (41 | ) | — | — | — | (481 | ) | |||||||||||||||
Proceeds
from sale of discontinued operations
|
— | — | — | — | — | — | ||||||||||||||||||
Purchases
of intangible assets
|
— | — | — | — | — | — | ||||||||||||||||||
Business
acquisition purchase price adjustments
|
— | (4,191 | ) | — | — | — | (4,191 | ) | ||||||||||||||||
Net
cash provided by (used for) investing activities
|
(440 | ) | (4,232 | ) | — | — | — | (4,672 | ) | |||||||||||||||
Financing
Activities
|
||||||||||||||||||||||||
Proceeds
from issuance of debt
|
— | — | — | — | — | — | ||||||||||||||||||
Payment
of deferred financing costs
|
— | — | — | — | — | — | ||||||||||||||||||
Repayment
of long-term debt
|
— | (32,888 | ) | — | — | — | (32,888 | ) | ||||||||||||||||
Purchase
of common stock for treasury
|
(16 | ) | — | — | — | — | (16 | ) | ||||||||||||||||
Intercompany
activity, net
|
226,118 | 12,493 | (10,747 | ) | (605 | ) | (227,259 | ) | — | |||||||||||||||
Net
cash used for financing activities
|
226,102 | (20,395 | ) | (10,747 | ) | (605 | ) | (227,259 | ) | (32,904 | ) | |||||||||||||
Increase
(decrease) in cash
|
28,723 | — | — | 380 | — | 29,103 | ||||||||||||||||||
Cash
- beginning of year
|
5,735 | — | — | 343 | — | 6,078 | ||||||||||||||||||
Cash
- end of year
|
$ | 34,458 | $ | — | $ | — | $ | 723 | $ | — | $ | 35,181 |
F-40
Prestige
Brands
Holdings, Inc.
|
Prestige
Brands Inc.,
the issuer
|
Combined
Subsidiary
Guarantors
|
Combined
Non-guarantor
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||||||
Operating
Activities
|
||||||||||||||||||||||||
Net
income (loss)
|
$ | 33,919 | $ | (8,839 | ) | $ | 8,087 | $ | 1,206 | $ | (454 | ) | $ | 33,919 | ||||||||||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||||||||||||||||||
Depreciation
and amortization
|
256 | 9,337 | 1,359 | 62 | — | 11,014 | ||||||||||||||||||
Gain
on sale of discontinued operations
|
— | — | — | — | — | — | ||||||||||||||||||
Deferred
income taxes
|
(505 | ) | 5,828 | 4,773 | — | — | 10,096 | |||||||||||||||||
Amortization
of deferred financing costs
|
— | 3,007 | — | — | — | 3,007 | ||||||||||||||||||
Impairment
of goodwill and intangible assets
|
— | — | — | — | — | — | ||||||||||||||||||
Stock-based
compensation costs
|
1,139 | — | — | — | — | 1,139 | ||||||||||||||||||
Loss
on extinguishment of debt
|
— | — | — | — | — | — | ||||||||||||||||||
Changes
in operating assets and liabilities, net of effects of purchases of
businesses:
|
||||||||||||||||||||||||
Accounts
receivable
|
1 | (6,808 | ) | (1,696 | ) | (549 | ) | — | (9,052 | ) | ||||||||||||||
Inventories
|
— | (522 | ) | 1,271 | (272 | ) | — | 477 | ||||||||||||||||
Prepaid
expenses and other current assets
|
(51 | ) | (494 | ) | 139 | 25 | — | (381 | ) | |||||||||||||||
Accounts
payable
|
102 | (3,012 | ) | 1,231 | 704 | — | (975 | ) | ||||||||||||||||
Accrued
liabilities
|
(7,713 | ) | 3,119 | 259 | 80 | — | (4,255 | ) | ||||||||||||||||
Net
cash provided by operating activities
|
27,148 | 1,616 | 15,423 | 1,256 | (454 | ) | 44,989 | |||||||||||||||||
Investing
Activities
|
||||||||||||||||||||||||
Purchases
of equipment
|
(205 | ) | (273 | ) | (10 | ) | — | — | (488 | ) | ||||||||||||||
Proceeds
from sale of discontinued operations
|
— | — | — | — | — | — | ||||||||||||||||||
Purchases
of intangible assets
|
— | (33 | ) | — | — | — | (33 | ) | ||||||||||||||||
Business
acquisition purchase price adjustments
|
— | (16 | ) | — | — | — | (16 | ) | ||||||||||||||||
Net
cash provided by (used for) investing activities
|
(205 | ) | (322 | ) | (10 | ) | — | — | (537 | ) | ||||||||||||||
Financing
Activities
|
||||||||||||||||||||||||
Proceeds
from issuance of debt
|
— | — | — | — | — | — | ||||||||||||||||||
Payment
of deferred financing costs
|
— | — | — | — | — | — | ||||||||||||||||||
Repayment
of long-term debt
|
— | (52,125 | ) | — | — | — | (52,125 | ) | ||||||||||||||||
Purchase
of common stock for treasury
|
(7 | ) | — | — | — | — | (7 | ) | ||||||||||||||||
Intercompany
activity, net
|
(33,911 | ) | 50,831 | (15,413 | ) | (1,961 | ) | 454 | — | |||||||||||||||
Net
cash used for financing activities
|
(33,918 | ) | (1,294 | ) | (15,413 | ) | (1,961 | ) | 454 | (52,132 | ) | |||||||||||||
Increase
(decrease) in cash
|
(6,975 | ) | — | — | (705 | ) | — | (7,680 | ) | |||||||||||||||
Cash
- beginning of year
|
12,710 | — | — | 1,048 | — | 13,758 | ||||||||||||||||||
Cash
- end of year
|
$ | 5,735 | $ | — | $ | — | $ | 343 | $ | — | $ | 6,078 |
F-41
SCHEDULE
II
VALUATION
AND QUALIFYING ACCOUNTS
(In thousands)
|
Balance at
Beginning of
Year
|
Amounts
Charged to
Expense
|
Deductions
|
Other
|
Balance at
End of
Year
|
|||||||||||||||
Year
Ended March 31, 2010
|
|
|
|
|||||||||||||||||
Reserves
for sales returns and allowance
|
$ | 2,457 | $ | 20,042 | $ | (16,278 | ) | $ | — | $ | 6,221 | |||||||||
Reserves
for trade promotions
|
2,440 | 20,362 | (20,751 | ) | — | 2,051 | ||||||||||||||
Reserves
for consumer coupon redemptions
|
297 | 1,281 | (1,315 | ) | — | 263 | ||||||||||||||
Allowance
for doubtful accounts
|
120 | 200 | (47 | ) | — | 273 | ||||||||||||||
Allowance
for inventory obsolescence
|
1,392 | 1,743 | (1,125 | ) | — | 2,010 | ||||||||||||||
Year
Ended March 31, 2009
|
||||||||||||||||||||
Reserves
for sales returns and allowance
|
$ | 2,052 | $ | 14,086 | $ | (13,681 | ) | $ | — | $ | 2,457 | |||||||||
Reserves
for trade promotions
|
1,867 | 18,277 | (17,704 | ) | — | 2,440 | ||||||||||||||
Reserves
for consumer coupon redemptions
|
215 | 1,480 | (1,398 | ) | — | 297 | ||||||||||||||
Allowance
for doubtful accounts
|
25 | 130 | (35 | ) | — | 120 | ||||||||||||||
Allowance
for inventory obsolescence
|
1,445 | 2,215 | (2,268 | ) | — | 1,392 | ||||||||||||||
Year
Ended March 31, 2008
|
||||||||||||||||||||
Reserves
for sales returns and allowance
|
$ | 1,753 | $ | 18,785 | (1) | $ | (18,486 | ) | $ | — | $ | 2,052 | ||||||||
Reserves
for trade promotions
|
2,161 | 3,074 | (3,368 | ) | — | 1,867 | ||||||||||||||
Reserves
for consumer coupon redemptions
|
401 | 1,926 | (2,112 | ) | — | 215 | ||||||||||||||
Allowance
for doubtful accounts
|
35 | 124 | (134 | ) | — | 25 | ||||||||||||||
Allowance
for inventory obsolescence
|
1,854 | 1,404 | (1,813 | ) | — | 1,445 |
(1)
|
The
Company increased its allowance for sales returns by $2.2
million as a result of the voluntary withdrawal from the marketplace
of two medicated pediatric cough and cold products marketed under the Little
Remedies brand. This action was part of an
industry-wide voluntary withdrawal of these items pending the final
results of an FDA safety and efficacy
review.
|
F-42